The 4 Things a Service Provider Must Get Right: Part Two Making Sure the Deliverables are Profitable
Episode 662: Show Notes
In part two of our series on the four things every service provider must get right, we’re talking about money! Particularly, we are talking about profitability. If you want a business that allows you to sleep and see your friends, and maybe even take a vacation, you need to be paying attention to the piece of your business that determines if your deliverables are profitable.
What does it take to really run your service fully? Can you identify what projects are bringing in the most profit for your business? Do you operationally know where you might have some of those ‘cherry on top’ niceties that you might be able to fund in a different or unique way?
At the end of the day, if you don’t have money to fund the business that you are running, you are not going to have a business to run. We want you to not only have a business to run, but we want your business to fund the life that you want to have, and that’s literally our whole mission over at Boss Project!
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The Profitability Problem Our Clients Encounter Way Too Often
Way too often, our clients are charging great rates, and they still experience scarcity and end up living from paycheck to paycheck. That doesn’t seem fair to us! This is the point where you need to assess if the product you’re offering is truly profitable, or if it just seems that way. Do you know what it actually costs for your company to deliver the product you sell? It could be the case that you have a business that is profitable, and you still have one product or service that is really eating into your overall prosperity as a business. If you’re not willing to analyze on an individual product or service basis, you can end up in trouble.
One thing we do in The Incubator is to guide you as you unpack your previous offers and analyze how much of the business they ultimately made up. More than what they cost you in revenue, we’re looking at how much they cost you and your company. There are countless services out there that cost the customer nothing, but they are paid for in other ways. There are services out there that cost the customer loads of money, and everything in between. This is where you have to remove all the emotion from the conversation. The question comes down to, who is going to pay for the commodity you have?
What it Means Not to Nickel and Dime People for the Niceties
The classic approach to funding something of value is simply to have the customer pay for the commodity you have. Often, it is possible to tweak that form of payment to make it less objectionable to customers. But very rarely does this look like charging a la carte fees for the niceties. Although that’s so easy to offer, sometimes, hiring a VA or growing your team just allows you to offer more without doing the work of figuring out what you really want.
A great example of how this feels for a customer would be if Starbucks suddenly started charging you for WiFi, service, and using their coffee shops as an office for the day. How would your expectations change? How would your feelings change? Do you want your own customers to feel that way? Although your bill only reflects the caramel macchiato you ordered, in reality, you’ve received way more for that simple charge. Which parts of what you’re offering have become standard within your industry? Which things do you need to stop calling out as special?
A Common Mistake People Make When Charging Clients
So often, we see clients charging only for the time they are actively working on a client project. If you’ve gotten to the stage of running a business where you are hitting six figures, you likely have other operational costs. They might not be massive, but that doesn’t mean they aren’t relevant! Most people have a fairly small overhead, but there are definitely costs that exist, from software that you’re running to your internet provider, hardware, and more. If you think about your service, they’re not just paying for the time you’re working on the project, they’re paying for everything it takes for you to create that.
If this sounds overwhelming, don’t worry! We have created a calculator we can apply to your business to make sure that you are appropriately adding margin. There isn’t a set margin you have to hit, but rather it depends on what you want to achieve.
Quote This
If you don’t have money to fund the business that you’re running, then you’re not going to have a business to run. We want you to not only have a business to run, but for it to fund the life and lifestyle that you want.
The Number One Thing that’s Going to Guide your Decision-Making
You are the most expensive part of your business. How much you earn should be the biggest cost to your business. You would be surprised by how many people don’t even factor this in! Let’s figure out what you want to get paid and what you need to get paid, what you need to do to thrive, and find success. Have you done the math to figure out your own salary? The number one thing that’s going to help you in your decision-making when it comes to which clients to say yes to is knowing this!
The biggest thing you can know is how much time it actually takes you to deliver your service. You can’t continue to say yes to everyone if you want your business to be successful. We know plenty of seven-figure businesswomen who continue to say yes to everything that comes across their path. Our desire is to see you get paid for it! We have a great list of questions that can help you to get there. Is it going to cost you more money or time? Who is going to pay for it? How much does it actually cost you to deliver your service? What are some ways you can create a win between operational savings and the value you want to add?
We’ve also curated a list of questions to ask yourself to rejig your goals. Can you scope your projects with precision? Can you prove direct attribution of the results that your clients are getting to the engagement, to the deliverables, to the thing you’re actually providing? The problem you said you wanted to solve, is there a direct correlation between what you serve and solving that problem?
Highlights
The Profitability Problem Our Clients Encounter Way Too Often [0:06:55]
What it Means Not to Nickel and Dime People for the Niceties [0:11:35]
A Common Mistake People Make When Charging Clients [0:16:58]
The Number One Thing that’s Going to Guide your Decision-Making [0:27:10]
ON TODAY’S SHOW
Abagail & Emylee
The Strategy Hour Podcast
We help overwhelmed and creative entrepreneurs break down their Oprah-sized dreams to create a functioning command center to tame the chaos of their business. Basically, we think you’re totally bomb diggity, we’re about to uplevel the shiz out of your business.
KEY TOPICS
Profitability, Services, Products, Adding Value, Operational Savings
