I understand that frustration. I've been there. (Some people assume that I write these blog posts and therefore haven't experienced this stuff. Trust me - I've been there more than once.)
On the plane ride home I started jotting some notes. What are the most obvious ways to make more money right now? What I came up with are some "almost obvious" ways to make more money.
Fair warning: Many of you won't like some or all of the advice that follows. Let me assure that I have done or continue to do every one of these things. If your first reaction is to argue with me, please suspect that reaction. At least consider that your gut feeling is wrong and ask yourself "What would really happen if I did this?"
And so here they are:
Eight Almost Obvious Ways to Make More Money Right Now
(Presented in order from immediately effective to those that take a little time.)
1. Raise your rates
Don't argue with me on this unless you've already raised your rates in the last few years.
The fastest way to make more money is to simply raise your rates. In my experience of twenty years in the consulting business, I think every three years is a very good average. If you haven't raised your rates since the recession started in 2008, you're overdue.
This is no exaggeration: Every single time I've raised my rates I've gotten busier. But set that aside for a minute. The fastest, easiest, most SURE way to raise more money is to charge more money. Period. It just is.
The only thing that REALLY stops you from doing this is fear. What are you afraid of? You won't lose clients. Really. If you double your rates, maybe. But if you raise your rates $5 or $10 per hour, no one will drop you. I promise.
It is even easier to raise your rates in the era of managed services. Everyone has a flat fee portion of their bill and an hourly portion. You're only going to raise one of these right now. Raise the other one next year.
2. Ignore the MSRP
Nothing frustrates me more than vendors who tell me how many points we'll make - except maybe VARs who say they can only make a few points. Learn a big lesson from the big boys: You can make as much as you want.
Our standard markup is 25%. So if we buy a toner cartridge at wholesale for $100, we sell it for $125. That means that our profit is 20% of the selling price. Simple math: markup 25% and your profit is 20% of the retail price.
That's what we do.
Sometimes we have to pay as much through distribution as the client would pay at Staples or CDW. Who cares? Our markup is 25%. Look at what the biggest, most successful consultants in your city are doing: They're charging 50% or even 100% markup.
Markup is irrelevant!
The price is irrelevant!
You are selling the right thing for the client. You're making a fair profit. If it's wrong, you'll make it right. But the goal is to give the client a perfect, trouble-free experience. If they go to CDW they are probably going to buy the wrong thing, have a horrible experience, and then you have to make it right.
The best customer experience you can give your clients is to sell them the right thing at a fair profit. That way you get paid for your time and expertise. And the client has a great experience.
3. Enforce the line between billable and non-billable
I always think the best first hire is an administrative assistant or office manager rather than a technician. One of the best things to turn over to that person is billing. Without the emotional baggage of being the owner, they'll just bill what should be billed. They'll stop giving away hours.
Hours are precious - and expensive in our business. Don't give them away.
I HIGHLY recommend that you draw a clear line between what's covered under managed services and what's billable. Generally speaking, Add, Moves, and Changes are billable. That's very clear and very fair. Adding a user? Billable. Fixing a mailbox? Included.
Once you HAVE a line between billable and non-billable, proceed to bill for every billable hour. Don't apologize for it.
4. Get Prepaid for Everything!!!
If you want cash flow (and you do), get prepaid for everything you do. Get 100% of managed services by the first of the month. Get 100% of labor up front. Get 100% of hardware and software up front. Get at least 50% or project labor up front.
Just Do It.
Again, this is easy. If you're arguing with me on this, you should ask yourself why.
Getting paid inn advance has additional advantages. It eliminates late payments, collections, and strained relationships.
5. Charge late fees and interest
Every single business you deal with will charge you late fees and most of them will charge you interest if you don't pay on time. Don't believe me? Pay every bill ten days late next month and see how much it costs you.
I work really hard to avoid late fees, but "stuff" happens and I end up getting dinged by the bank here and the phone company there. A few times a year I am reminded that I really need to make it a priority to pay bills on time . . . even if I'm in a foreign country. In all I probably pay $100 a year in late fees. That's a lot of beer down the wrong drain!
Now the truth is that your best clients will occasionally generate a late fee. Stuff happens. And they'll ask you to reverse. And you probably will. BUT the lesson is learned. They're not going to do that every month. They're going to say "Oh. We have to pay on time."
Again: What's your fear on this? You won't lose clients because you adopt the same policies of 99% of the businesses out there.
6. Invoice in a timely manner
Now we're getting into the territory where you already know you should do this, but you may not be doing it.
We bill all monthly maintenance in advance so there's zero excuse for it to be late. Incidentals and the odd hour of time are billed weekly.
Just as with tracking time, you need to do this in real time. Log it in your PSA and get an invoice out as soon as possible. If you wait until later, then you have to rely on a perfect memory. Which is perfectly impossible!
7. Track time thoroughly / Work in real time
As I've mentioned many times, time is the most important thing you can track. It costs more money than anything in your budget. It brings in more money than anything in your business. Being sloppy with time is the most expensive mistake you can make. If you lose just five hours a week at $100, that's $26,000 per year. That's either half a technician or a whole lot of beer!
My brother Manuel just started teaching a five-week class for us on tracking time in real time. You can get the details and catch up at www.greatlittleseminar.com.
Track every hour that move in and out of your company. That means those hours move in and out of your budget.
8. Stop saving your clients money
I know this sounds cynical but it's not.
What is your client relationship about? Is it about money? Is it about customer service? Support? Making their business run better? Keeping the technology in the background so it just works?
My friend Dave Sobel (now with GFI Max) says that the term trusted adviser is absurd. Of course you're trusted. The relationship isn't about trust. Trust is assumed. The relationship is about the advice. The relationship is about your two businesses making everything work better all the time.
You're not there to save money. That's the accountant's job or the controller's job. You're there as a consultant brought into the fold to be part of their team. You're in charge of the technology. You're in charge of UPTIME. You're the one they look for to provide what they need.
The most disheartening experience you'll ever have is when something fails, the boss asks why, and you say that you were trying to save them money. I've experienced this. When the client said, "I didn't ask you to save me money" it changed my business forever.
I don't quote cheap stuff. I don't sell refurbished crap. I don't quote second and third rate equipment. We sell the right thing at a fair profit so we can provide the first rate support our clients are looking for.
Overall: Be fair to yourself
There's one more theme, but it's really worked its way through this whole article. If you want to make money, you need to be fair to yourself. You can't cut all the prices all the time, work for free, never raise your prices, and let clients walk all over you when it comes to money.
People who do that go out of business and their clients go find somebody else.
Providing good customer service does not have to mean that you put yourself in the poor house.
You need more money? Be fair to yourself. Treat your business like a business.
Karl, I would suggest the quickest way to make money is to actually call your clients and talk to them. Take them out for coffee and ask them what pain points they have in their business. Solve these you'll make money and chances are others will have similar pain points so you'll be able to solve them there even quicker!ReplyDelete
With regard to point 3, I have long been telling my colleagues that in one sense, and a very real sense, there is no such thing as "non-billable time." All time is billable-- the only question is how the time is billed. Is it billed hourly? Prepaid? Net 30? Annual Contract? Quarterly Contract? Project? That ties in to point 7: even contract and project work needs to be tracked thoroughly so that the price of the contract can be reasonably determined at its next review and the price of the next project can be reasonably estimated. In the end, your clients as a group and as individuals have to pay the costs of keeping your company in business, or else it won't be in business. If you do give something away for some reason, it has to be made up elsewhere.ReplyDelete
Robert - That's always a great way to build lasting relationships.ReplyDelete
Andrew - I agree with your concept. We just implement it a little differently. Rework is not billable to a client, for example. But I still pay the employee. :-)