Episode 94: How to Make Your Services Business Profitable This Year
We’ve all heard the saying: “You’ve got to spend money to make money.” But that’s actually not 100% true, and in this episode, we’re diving into the ins and outs of how to make your services business profitable.
Here’s the scoop from Episode #94:
Typically, when we chat with service business owners, they all have one thing in common. They want to make more money and the idea is usually that they just need to book more clients.
While booking more clients is a way to make more money, it’s only part of the puzzle. A big part of making sure you can make more money, not just in the business, is ensuring that your take home pay follows suit.
We often see cases where people make exponentially more money, but their profitability actually declines.
What’s the point of making more money if you’re not personally reaping those benefits?
It should be noted that if you’re going into a growth period where you’re bringing on billable new hires, you’ll likely experience more revenue in the business but with a steady or slightly lower take home pay for a period. This is normal. But if you’re a solo show and you’re bringing in more revenue without a bump in your pay, there’s room for improvement.
What Is and Isn’t Profit
- Profit is the amount of money leftover after Revenue and Expenses are netted out (in a traditional sense, your salary or owner’s draw is included in your expenses, but usually as small business owners when we say profit, we mean our draw — there are pros and cons to this).
- Traditional accounting says: Revenue – Expenses = Profit.
- The Profit First model says: Revenue – Profit = Expenses.
- Of everything the Profit First model covers, this is the #1 takeaway. It can be rigid, especially if you’re running an online based service business without much overhead.
- You want to get in the mindset of figuring out how much you need from your business to make your household work, then whatever is left over, use for your expenses.
1. Understand Your Money Flow
It’s hard to be more profitable when you don’t have a handle on your money, so any discussion of profitability needs to start here.
A good place to start with this is doing an expense review. We walk you through how to do this in the new 5 Steps to Consistent $5k Months course which you can sign up for right here.
By doing an expense review, you can identify potential trouble spots:
- Things that you may not need to pay for and can eliminate
- Where you may be overspending
- Areas where you need to fine tune your budget
The goal here is for you to understand, in a factual way, how you’re really spending your money. It’s NOT for you to beat yourself up or deny what’s happening. If you want to be profitable, this is an important starting point.
2. Optimize Current Clients and Operations
There’s always so much you can do within your business, and these are things that, quite frankly, you should be handling before you work on bringing in new clients.
The truth is that there’s capacity within every business — even if you don’t think there is.
What you need to look at optimizing:
- Where time is wasted
- Scope creep, over servicing, boundaries
- Busywork and non-essential goals
- Pricing with current clients
- Team hours and roles
- Boundaries with clients
3. Stop Being Passive and Get Active Finding Clients
With the structural things out of the way, now you’re in a position to go get more clients and ensure those engagements will actually be profitable.
Now, if you need clients, you need to stop waiting for them to come to you. As we talked about in Episode 91, you need to go from passive to proactive. No more waiting — you need to get into action — as more conversions will result in more closed clients. This may take time — and will definitely take energy — but it’s well worth it in the long-run. It will help you build a healthy, profitable business that lasts.