Navigating the Profitability Conundrum

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RE: Navigating the profitability conundrum…

Today we’re going to do a quick check-in on the profitability of your service business.

If you’re a single service provider, how do you measure that? It’s easy to confuse income with profitability when you’re selling YOU, but income isn’t profit.

Just because you’re making more money this year than last doesn’t mean your profitability is increasing. If you’re working twice as much to increase your income by 25% over last year, you’re moving backwards.

One of the easiest places to see your general profitability trend is to take a close look at any long term client engagements you have.

Increasing profitability means your fees are steady or increasing while your effort invested to create those is decreasing.

What? Isn’t that unethical? Isn’t that lazy?

No. It’s the POINT.

But you have zero chance of getting there if you’ve set things up wrong.

If you’ve focused the client conversation and set their expectations only in and around time and effort invested, or even in how much you’re “THERE” doing work, you’ve set yourself up for a hard road.

If you’re ever going to sever the connection between effort in and money out, you have to set the example FIRST.

That means you start CUTTING the connection between your fees and the amount of action you take or the amount of time it takes you. (This is a process that can take a while. Be patient, one step at a time.)

That means you stop allowing the conversation to fixate only on what you’re doing. What you’re doing isn’t the REAL point of you being there. It’s all about how what you’re doing helps the client achieve something or improve something or create some sort of progress. That’s what they’re ultimately buying.

A home builder doesn’t charge a fee based on how many times he has to swing the hammer, he charges the fee based on the house he’s building for his client.

The point is that you structure a way to increase your profitability over time. Be bold, get creative.

Just because that decision generates some puritanical emotional response of guilt in some of us is a clue just how deep the brainwashing goes.

If the client is well served and happy, then your next responsibility is to the health of your own enterprise.

Now it’s kind of hard to change things if you’ve already screwed up with a client. Once they put you in a “box,” it’s probably not worth trying to make another one. Their perception is set, so it’s just easier to move on.

At some point, however, you need to be the one setting the example. All it takes is confidence, belief in your own value, some trial and error, and a commitment to take care of yourself just as much as you are committed to taking care of your clients.