If you’re busy all the time but don’t seem to be making any money and working horrendous hours, it could be that you need to check who your clients are. Making sure the clients you are working with are the right clients for your business is crucial to the profitability of your business and the hours you spend working.
I worked with a business providing services in the construction industry. The company seemed to have good revenues but there was no profit in the business and the owners weren’t paying themselves.
We spent some time examining the client mix to work out if there were particular clients or types of work that didn’t make any money. I refer to this as grading clients.
We found a number of different issues but two that really stood out were:
1) Private residential work was not profitable.
2) One particular client who always seemed to be a good client actually wasn’t. We helped them prepare tendering documents for which we didn’t get paid. Only when they won a tender did we get the job. However, analysis showed that they only won, one in 5 tenders making it unprofitable for us.
So my client had to show some leadership and be courageous enough to make the call to not do anymore residential work and to start to charge clients when helping them prepare tendering documents.
You see the problem becomes that you have to do a huge amount of profitable work to make up for the unprofitable work you do. And it’s not as simple as thinking that you lost $100 on that job so you just need to make it up on the next one. Dunn & Bradstreet have a report stating that if your net profit is 10% you need to do 12.5 times the amount of your loss on a job to make up for the loss. Put in simple terms, if you lose money 1 month you can spend the rest of the year making up for it.
So the simple solution is that you need to stop doing work that doesn’t make you the amount of money you need to make. Grade your clients and job types A B C or D. Create the guideline for what makes up each category. Be a strong enough leader to say NO to D grade clients and a few of the C’s. The A’s and B’s will always play by your rules, be happy to do it, and not ask for favours and discounts. The D’s will want to set their rules, still be unhappy and ask for favours all the time.
Get rid of your D Grade customers now. You will make far more money and reduce the hours you work. (Yes, my client paid themselves, made a profit after wages and gave bonuses.)
I would love to hear from you on how this information has helped you or if you have other tactics or strategies that help you get stuff done.
Until next time
“Speaker, author and trainer who specialises in helping people get stuff done!”