Change Your Business Model and Watch Your Profits Soar!
One of the big problems of small service businesses based on one person’s talents or expertise is just that – the business depends on the talents and expertise of just one person.
For product-based businesses, growing profits are comparatively easy; such businesses can expand by exporting and/ or opening more branches, just to give two examples. But what if you have a service-based business?
There are only so many hours per week one person can work. And you can only raise your hourly or project rate so much before you price yourself right out of the market.
Which means your service business has a profit ceiling – a ceiling that may not allow you to make the income you need.
How can you break through and grow your service business’s profits? The answer is so simple. Change your business model so that your service business’s profits (and your income) are no longer dependent on you.
Here are six ways you can do that and make your “solo” service business’s profits soar.
1) Add products.
There is absolutely no written rule anywhere that says a small business has to be a product-based business or a service business. And for many small businesses, selling products that relate to the services they provide is natural.
The carpet cleaners that sell stain remover products.
Veterinarians that sell pet food. Look at the businesses around your community and you’ll see examples all over the place. Add the right products and your profits could increase exponentially!
The trick: Be sure to choose products that relate to/complement the services you provide. Selling unrelated products doesn’t work.
2) Hiring and training.
This is another obvious solution that many small service businesses have used successfully. If one person can only make so much money, then x number of people doing the same thing can make significantly more money.
If the service your business provides can be taught to others or is a talent that can be hired, hiring and/or training can work very well for you. For instance, if you are a designer, you could hire other designers, enabling you to expand your client list. Or think about the carpet cleaner again for a moment. It would be easy for him or her to train employees to provide the same service.
3) Turn your Service into a Product.
By taking the service you provide and turning it into a product package, you unchain yourself from charging by the hour and relieve clients of their fear of hourly rates stacking up endlessly as a project drags on.
Read C.S. Hayden’s "Turn Your Services Into a Product" to learn more about how you can turn your service into a product.
The trick: Be sure to develop products with your target market in mind – and be sure to thoroughly test them before marketing them.
4) Change your market.
Different people have always been willing to pay different prices for the same thing, so there have always been markets from low-end to high-end.
Take a close look at your market; you might be able to “move up” to a higher price point. And don’t limit yourself to thinking only in terms of a business to consumer business model; consider changing to a business to business or even business to government model. Governments, in particular, are notorious for paying more for products and services than other potential clients.
5) Repackage yourself.
Just as markets have different price points for services, so do professions.
Here’s a secret; there are many professions where you can move from one to another. The barber can become a hairstylist; the masseuse can become a massage therapist; the writer can become a content developer. Titles matter when it comes to fees.
Repackaging yourself is not just a matter of changing what you call yourself, of course; it may also involve improving your credentials or increasing your celebrity.
The trick: Repackaging, like rebranding, has to be complete. It may involve sweeping changes such as relocating or rebuilding a client list, so be sure you know what repackaging will involve before you do it.
6) Stop doing one-offs; sell the maintenance as well as the service.
Think how much more income you would have if instead of paying you to do one thing, your clients or customers just kept paying you. That’s what this business model is all about. For example, if you are a web designer, you could offer a service of maintaining the website with monthly or annual fees, instead of just designing a website for someone.
Or if your business is installing irrigation systems, you could also offer a maintenance service to your customers that would involve turning off the system for the winter and turning it on in the spring – a truly brilliant idea because it would also give you the opportunity to check the system over twice a year and spot any repairs that needed to be made.
The trick: Focus on creating a maintenance program that solves a customer’s current or potential problem; that’s the kind of maintenance program that will be easy to sell.
Your Income Level is Largely Up to You
You don’t have to settle for what you feel is a low income from your business just because you charge by the hour for your services and don’t have time to add any more billable hours to your week. Service businesses can make just as much money as the most successful product businesses. All you have to do is figure out how you’re going to break through the profit ceiling – and do it.