My client was a small consulting business with a mission. It was established by two friends looking to pursue more meaningful and enjoyable work together. After a year or two they had built a solid foundation of high-quality product and service offerings, employed a couple of part-time support staff, had established a base of very satisfied clients and, while their wages were low, they were starting to make some profits. Things were looking up.
Fast forward a couple more years and a problem was emerging – they were stuck! Profits were there but were slim, the years of working hard were beginning to grind them down and the passion was starting to wane. They loved what they did but they didn’t love the sense of going nowhere (and not getting paid much for it).
They had come across Collins SBA and were intrigued to find out about our strategic planning services, in particular, the “Business Blueprint” offering. They knew they were almost there but the business model wasn’t quite clicking and they needed a fresh set of eyes to offer a clear view on how to get their numbers moving in the right direction.
I reviewed some client feedback and ran a quick analysis of their business model based on readily available financial data. Three key themes jumped out.
Firstly, they had happy clients and were clearly offering a good service that produced results. In fact, their service offer was quite unique and there really wasn’t any competition in their niche. Clients were obviously satisfied with what they were getting.
Secondly, they were using their time effectively. In fact, our analysis showed that they were hitting an overall utilisation rate of about 75%. Pretty solid for a small business heavily reliant on the inputs of the Directors.
But it was the third aspect that, literally, was the money. Their average hourly charge rate was really low. Having seen hundreds of businesses in all types of industries I know what the numbers should look like and, despite their great work, these guys were not getting paid what they were worth.
In their workshop session, we explored their approach to pricing and some key aspects jumped out at me. Have you heard any of these phrases before?
“I’m sure the competitors will be doing it cheaper”
“We can’t charge them that much”
“It’ll probably take me longer than this do the job but I’ll base my quote on best case”
“This will probably be too expensive for them”
Then we asked them a simple question: “How many quotes do you lose based on price?” After some thinking, their answer… none.
The lightbulb went on. There was no reason for them to price as low as they had been. The only barrier to them getting paid what they were worth was one they had imagined. Their new goal for the quarter – to get a client to say no based on charging too much. Only then could they say they had found their price point.
Since their planning session with us, they have hit the market with confidence. They are no longer prepared to work late into the night to earn a meagre paycheck and every proposal is priced at their target rate or better.
And they finally found a client to say no. (It was a client that was always asking for extra for free, a client that didn’t take the time to implement their recommendations fully and a client who they, really, didn’t like that much. So why not charge that client double and see if they say no. They did!)
But despite finding a client that said no, they have seen their business revenues spike 93% from the previous year and profits up 122% – not by working harder, but by getting paid what their clients really think they are worth.
|1. Information gathering||Questionnaire & data access
|Understand what the business owner wants and the key issues to be tackled|
|2. Financial analysis
|Development of a working financial model||Understand the financial drivers of the business|
|3. Business by design||3 to 4-hour workshop with Collins SBA Adviser
|Uncover how to link business activities with financial results|
|Business Blueprint & KPI’s||A clear long term vision and some immediate action items to focus on|
|5. Follow up
|Regular reporting and accountability meetings||Staying on track, not falling back into old habits|
If you would like to find your true worth and get your business on the right path to success, please contact Rob Cameron, Adviser at Collins SBA today, 1300 265 722.