How to Work Less and Make more Money…

When I talk with local business owners about building their business, a response I occasionally receive is ...

"I could not handle any more work, we are flat out!”

The problem here is that yes, they are flat out, but when we look at their profit or bank account, they are not massively profitable. They are turning over some extremely valued and experienced employees and the replacements take twice as long, to do half the work, making three times the mistakes and the business is not a fun place to work..

The challenge is that many business owners believe that the business being busy (selling more) means that they will be making more money. Unfortunately, the reality is that business building is more about 'quality' than quantity. Knowing who your most profitable customers are and servicing them “within” your existing capacity.

Step One: Who are your most profitable customers

We all have customers that drive us mad. They aways pay late or complain and haggle over invoices or prices, wait until the last minute to lodge important paperwork, put unnecessary demands on you, have questionable hygiene habits... the list goes on.

The first step is to define your customers into 4 classifications – 1, 2, 3 & 4 class customers. The definition is up to you. Classification 1 customers are the easiest customers to manage; they don’t haggle on price, pay on time, easy to service and are wonderful people to deal with. Classification 2 customers may be all of the above but pay late or complain a bit. Classification 3, may haggle on price, pay late and complain regularly and classification 4 may only buy when we offer discounted, loss leader, advertised specials. They pay late and complain all the time. They cost us more money to serve them than we make and they keep us very busy.

Step Two: Tell them where they rate

Send all your '1' and '2' customers a letter telling them that you appreciate their business and that you enjoy serving them.

Then send your '3' and “4” class customers a letter suggesting that it might be time for a 'new approach'. State your commitment to service and explain how important their participation is in the relationship. If there is no change after a couple of more contacts, you might refer them to your competition.

It costs you to time, effort and more profitable work, when you are caught up with these customers. If you only make a small profit, doing a job for a customer who haggles, complains and wastes hours of your time and then starts on your staff members, you'd be better off without them.

Step Three: Do the numbers

Prior to exiting any customers, it is best to know exactly how profitable your business is with or without the strata 3 and 4 customers. I have run businesses where the fixed cost of the business did not vary with the number of customers we serviced, so the aim was to have as many customers as possible. When however, the capacity of the business was being exceeded, services were constantly running late and our most valued customers were being let down at the expense of “price/opportunist shoppers” we had to address the capacity issue.

So, know your capacity and work within it. If you need to increase capacity, do so, but do not take on more customers, prior to having the capacity to do so. The consequences of taking on more customers than you can serve is as previously mentioned…loss of great staff, quality standards dropping, declining productivity, lower efficiency, overtime and after all the hard work, no profit to show for yourself at the end of the day.

The time you recover when your '3' and '4' grade customers take their business to your competitors, driving your competitors mad, can be used for marketing; attracting customers that want to do business with you, profitably. You can focus on your profitability, efficiency, productivity, systemisation of the business You could even go home early and spend some extra time with your family, playing golf, holidaying or on that neglected hobby or passion.

Step Four: Maintain the system

Its important to protect yourself against more '3's & '4's...

Make sure that you set up a system to educate your new customers on how you do business together. Tell your new customers through this education about your uniqueness and that the outstanding level of service that you provide for them is possible because your customers commit to participating in the relationship and define what you expect of them.

Reduce the number of “3” & “4” customers coming on and focus on serving the “1” & “2” customers better…

If you can service your most values customers better and increase the following 3 areas, your business will remain profitable…

1. Have your existing customers spend more, more often…
2. Attract exactly the customers you want, your target customer, don’t attract the customer that you have to “buy”, the ones that you are left with, just to get them in the door and then you never see them again…
3. Keep your existing customers and extend the time they remain doing business with you…

If you are keen to improve your business, your open to new ideas and prepared to try new things, we can assist you.