Aug 28, 2023
This article was written by Kate Toon who will be presenting a webinar on social media advice on September 6th at 8am (Australian Eastern Standard time). Register today!
Just because you are a small business, agency, or freelancer doesn’t mean that you can’t dream big. After all, growing through innovation isn’t just for the big corporations. However, most people in service-based businesses seem to think that in business we must have that one big idea.
The life changer.
The amazing innovative product or service.
The killer launch.
The smash hit.
That one magic thing that finally tips the balance in their favor, opens the floodgates,and lets the cash flow in.
But I disagree! For me it wasn’t one big idea that helped me reach six figures (and beyond), but rather lots of small ideas. Little wins that added up over time.
It was about fixing small failures and recognizing opportunities for improvement.
Yes, it may sound less exciting and far from entrepreneurial, but for me mopping up the business crumbs rather than chasing the big fat bread bun worked.
So, based on what I’ve learned, here are the ways I think a service-based business could make more money:
Yes, I know this sounds pretty obvious: charge more, and you’ll make more money. But it’s amazing how hard some business owners find it to increase their rates. And often those rates are based on little more than a quick skim of their competitors’ rates and a passing thought about profit margins.
They set their prices without a thought as to whether they’ll support their cost of living or give them a decent rate of profitability.
I recommend upping your prices with inflation every year. But you should also consider a larger increase as your experience and abilities improve.
Most clients and customers will wear a 10% increase without really noticing. It gets trickier at 20%, so I prefer a strategy of incremental increases rather than a giant leap.
We all know we’re happy to spend more on a specialist than on a generalist.
I’ll wait three months and pay a premium to have a consultation with a renowned neurosurgeon. But I’m frustrated when I have to wait ten minutes to see my low-cost family doctor.
Specializing can help you:
While it may feel scary to say, “We only work with these people”, keep in mind that you don’t have to do that. Instead, you can reframe it as “We work with x, y and z, but specialize in helping people do y”. This lets you stay broad enough to take on customers as you need them, but specialize enough to charge a premium for your best services or products.
Nearly every business owner I speak to says their first goal is to replace the income they had in their old job. That makes sense. While we love the freedom and autonomy of working for ourselves, we miss the regular salary.
A steady, regular income can help us feel safe and secure. It creates predictability, reassures us that we’ve got our rent or mortgage payments and the basics covered.
Here are a few other forms of recurring income that have worked for both me and my clients.
You agree on a set price for a set amount of hours or product, and bill at the start of each month. You might want to throw in a little sweetener such as a 10% discount to thank the customer. But they get the benefit of being a VIP, and being serviced before everyone else.
These regular amounts can help you plan and feel secure. They also give you the headspace to go after other opportunities because you know your day-to-day costs are covered. Everything else is the icing on your business cake.
It’s hard to sell a retainer to a client from the get-go. You’re more likely to win them over after the first project by suggesting you can keep helping at a VIP level for a set fee.
Maintenance plans are similar to retainers, and work for all kinds of service-based businesses – everything from developers to accountants. But rather than agreeing to work a set number of hours, you agree to complete a set number of tasks.
This lets you charge a monthly fee for an agreed level of service, or break down an annual fee into smaller chunks.
For example, you may use your accountant only at tax time and get one monster bill at the end of the year – which is hard to budget for. Alternatively, you could ask if you can pay a little each month – so you can budget it all out.
For service-based businesses, this can be a great way to support your clients in a more cost-effective way. Chances are you’re giving similar (if not the same) advice to all your clients. Setting up some kind of membership or group for a monthly fee is a great way to turn that expensive one-to-one service into a more accessible one-to-many.
For ecommerce businesses, subscription boxes work well for generating regular income. It feels like an easier sell if you’re offering something functional (like toilet roll), but it can also work for luxury items. People love receiving nice things in the mail. And the idea of getting an early release, or carefully created subscription box without having to think about it, is super appealing to many.
Selling advertising space on your website, or building a simple directory for business owners (and charging for listings), can be a great way to add a little extra recurring revenue. It’s also a great way to build loyalty and retention with your existing customers.
While they may not seem like revenue-generating options, contras and partnerships reduce the amount of marketing needed to win customers. It lets you ‘pay’ for services without increasing your expenses.
Working with other like-minded business owners expands your customer circle and comes with built-in trust.
While back-scratching is nice, filling your bank account is better. How often do you find yourself recommending businesses?
It's great to do this out of the goodness of your heart, and lovely if the other business reciprocates. But referrals are often a one-way street. And while the gifts of wine and cookies were nice, it can feel like a poor exchange.
I could go on, and I do in fact give many more ideas around improving productivity and profitability in my book Six Figures in School hours, but I hope these ideas get you started.
Making money in business isn’t just about a simple exchange of time for money or goods for cash. It’s about being inventive and looking for other opportunities, cutting costs, and selling your mind instead of your time.
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