What steps do you take if costs are rising but margins are decreasing?
The answer to this question can depend on the type of business you have. For example for a service business, consider the following.
Keeping Costs In Line With Profitability.
I used to feel that every client deserves the same level of service regardless of the amount of income they provide to my business. That is until there weren’t enough hours in the day to do that. To provide the same level of service to all clients, it reached a point where I realized I had to either spend more time at work and less with my family. Or, hire more staff, which meant less income for my family. I wasn’t willing to do either.
The level of service you provide and therefore the amount you spend should coincide with profitability to your company. With the current economic situation as it is, taking a closer look at the cost to service your customers and assuring it is properly aligned can improve the company’s bottom line and help to anchor your best clients to you and your business.
It is normally more cost effective to keep existing clients than it is to obtain new ones. I coach many small business owners to code their customers or clients based on profitability to their business. The people that are providing the greatest income to the business, deserve the best service. Going above and beyond for them will also help to better assure they stay with you. For example, your “C” clients (not the best clients) may receive an annual newsletter and holiday card signed by everyone at the business. Your “B” clients receive a quarterly newsletter, holiday card signed by everyone at the business and a semi-annual phone call to check in and see if they have any questions and how you can further be of assistance. Your “A” clients (the best clients) would receive a monthly newsletter, holiday gift and card signed by everyone at the company and a quarterly phone call to check in and see if they have any questions and how you can further be of assistance.
This is just an example. And of course, you will need to set a plan that is appropriate for the type of business you have.
The correct level of customer service for every client can be one key to the success of your business and provide the balance you need to more efficiently manage your time and resources while maximizing your bottom line.