Time is money, and nobody knows this better than service business owners. The struggle is real when your business model presents your services as your "product." There are only so many hours in a day, and you're literally trading those hours for dollars, which puts any successful founders of service-based businesses in a scaling conundrum.
How do you increase profitability and scale? You could raise your rates, but you can only do that so much before clients start jumping ship. You could bring on additional staff, but that bandwidth comes with a hefty price tag.
Scaling a service based business is different that selling a product, because you are the actual product. Below are a few paths to services profitability.
Track and measure everything You can't improve what you don't measure, so track and measure everything. How much time are employees spending on tasks, projects, and clients?
What is the real return on investment (ROI) of the services you offer? If you can't answer these questions, it's worth getting to the root of them. They'll provide insights on the levers you may be able to pull to increase your profits.
Understanding the ROI of your services enables identification of your most, and least, profitable clients and employees. From there, it's a question of whether you can reduce costs through standardization around best practices, or increase prices to reflect the intensity of the effort.
Standardize and repeat best practices Which of your services are most profitable? Are they repeatable? Find those that generate the most income for your organization and if they're not already systematized, figure out how to make them so.
Going through this process has the ancillary benefit of helping you identify where your customers most need support, which could lead to new business ideas and opportunities by expanding upon those services. Another important piece of this puzzle is the ideal customer profile. Who is your big fish?
What services do they need and want, and when? How much would they pay for the outcome this service provides them?
Based these answers, consider creating service packages to start selling -- rather than your hours. By standardizing service products, you help ensure increased profitability. Of course, going through this process requires the aforementioned measurement piece.
Eliminate loss leaders It's hard to increase profitability without eliminating poor performing services. Consider cutting out labor intensive loss leaders and parting ways with troublesome clients. Free your team up to take on more profitable projects.
This is often the hardest part for many founders because in the early days, you probably took just about customer to generate some income. If these clients are still around, there is some loyalty attached to them.
It's hard to part ways, but if those customers are no longer the right fit and are costing you money, it will be better for both parties in the long run. Retaining customers solely for the sake of loyalty when all other signs show they are no longer ideal can build animosity, which is not good for either party.
On the other hand, you may be pleasantly surprised. Sometimes those long-time customers are thrilled to see your business grow and appreciate just how much work goes into those services, and are happy to pay a reasonable increase.
Lean on your tech stack The right tech stack can make all the difference in the world to a service business. A little automation goes a long way, and by relieving your team of inefficient, manual processes, you can reclaim more of that highly coveted time each day.
For example, can your team quickly access assets like lead nurture campaign templates or customer journey mapping exercises, or do they have to reinvent the wheel every time they're needed? An informed software purchase can yield exponential improvements and make life easier for all involved.
Mold something new It's entirely possible all this tracking, measuring, trimming, automating, and productizing leads you to discover an entirely new service offering you've completely missed -- one that's popular and profitable. When you're looking at increasing the profitability of your services business, it's important to keep an eye out for opportunities to split or recombine things to better serve the market.
You can't add more hours to the day, but you can start seeing improvements in the bottom line by taking a thoughtful, measured approach to evaluating your service offerings. Start by tracking and measuring everything. Figure out what's most profitable -- and do more of that, more efficiently.
You've got more options than raising rates or hiring more staff. Regardless which you choose, commit to seeing it through. There are only so many hours in the day, so make them count.