Margins are so important to make your business a success. Have prices too high and scare off customers, or price too low and be swamped but not profitable.
The tough decisions are the ones that will identify you as a leader and business person. Being hard on yourself and the business, often a passion project is perhaps the trickiest aspect. As a solo worker or small business, it becomes even harder because you need perspective when making these calls. Perspective is often a luxury when running your own business.
…letting go of customers for the sake of a better margins is sound business sense.
As you define your value, so it becomes increasingly important to measure your time against how much you charge for your services. Your time becomes a commodity. The more time you spend arranging the layout of your office desk (i.e procrastinating) the less time you spend on actual constructive and possibly paid work.
- Time becomes your enemy. The key here is to be efficient in all things. But not at the expense of quality in your work. You wanted to work for yourself to have more time to do the things that matter to you. And rightly so. But as your own boss, the discipline in your time-keeping and management is the thing that will define how much you charge and where that margin is.
- Efficient processes. Whether it is using a new software tool for your website orders or defining exact timings for certain types of meetings. Saving time for mundane matters will positively affect your bottom line. This becomes easier the more you do these tasks and the shortcuts will become more obvious. Making sure you identify these aspects sooner rather than later will benefit your business no end.
- Charge your worth. If you are quoting for a piece of business and you are surprised by how much it costs the customer, don’t be. The time you spend and the quality of work required to reach the desired result IS your business. As long as the total bill is not completely ridiculous! Customers will respect you more and the bar remains high for you.
- Assess your needs. Over time, the business will change and reliance on once-valuable systems and products will cease. Technology will move things on too. Your ability to identify your changing requirements will keep the business lean and agile. You want your business to have the best-in-class. But not at the expense of other more important factors.
This overall methodology applies to your customers too. Being ruthless without affecting relationships is a skill learned over time as well. There will be mistakes and noses put out of joint. Ultimately though, letting go of customers for the sake of better margins is sound business sense.
- Honesty is the best policy. If you have a long-standing customer and the ongoing rates are affecting your ability to supply, be honest with them. Explain the business reason. Nine times out of ten they will adjust accordingly. Or may even have a better solution.
- Shop window. In some rare cases, it may be better to keep a customer at a loss for the benefit of gaining other customers in their catchment. Or to attract a new customer on the basis you work with that loss-making customer. They may offer you access to additional customers. Very much like you attracting the queen bee (flagship customer) to your honey pot (photography business). Others will follow. This is not a strategy to adhere to across the board. Move forward with caution and with your overall margin at the forefront.