Here is a big “aha” moment for small service-based business owners: your ability to scale a business is limited because you only invoice your client for hours worked. As a result, it isn’t easy to leverage your sales without adding additional labor hours. Of course, you can add cheaper labor to help you increase your profits, but it usually is a one-to-one ratio.
So how can these businesses generate more profit? It would be best if, first, you were sure you’re marking up the sale price accordingly.
A typical quote about service-based businesses goes something like this: a customer isn’t paying for the hour it takes to get the job done; they’re paying for the years of experience it took you to accomplish the job in an hour.
Our hours do not accurately indicate the amount of work on any given project. We may be accomplishing an amount of work in one hour that would take a competitor three hours. By solely charging for the hours worked, we’re doing ourselves and our staff a disservice.
So what’s the solution? There are a few ways to generate more profit and grow your business without stretching yourself too thin. Here are some answers to scaling a service-based business:
Want to learn more about how to create leverage in your business? I’m here to help. Fill out my “get started” form for a complimentary coaching call to discuss scaling a service-based business.
Coach Dave
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