Service Based Businesses Have Got No Time!

time-300x171I’m on a bit of a tangent from writing about marketing but hopefully this is something that people will find useful.

Imagine running a business full time selling a product. You have to do all the things that businesses do like marketing, admin, sales, customer service. This is a typical business that requires you to work on it full time if you want to make a good living. Except the product you are selling is not a physical product but chunks of your time that you must honour. This is the case if you offer a service. Even if you don’t bill by the hour if you are offering a service then clients are paying you for your time.

With this type of business your time places a massive limiting factor on your earning potential and on growing your business. Businesses at the extreme end of this spectrum include solicitors, accountants, consultants, web designers, marketers… The further away your business is from at the being a Professional Service the less effected you are by this issue. For instance if you are a tradesman then a portion of the value you provide will come from supplying physical products like materials or products like a new boiler. If you sell financial products then some of your time will be used as an advisor, but some of the value you offer will be provided by the financial products you sell, making it easier to generate income.

This limitation became apparent to me when thinking about all the service based businesses I have come into contact with over the years or know of. Almost every service based business I know that started as a one man band has remained as such apart from 1 or 2 exceptions. Vice versa most of the service based companies that have grown where started by at least 2 people. Most of the businesses that are only partially service based like tradesman and financial advisers seem to have an easier time growing too. Even with a service like recruitment most of the value you are providing is in the new employee you just found so you are still trading something of value on top of your time, making it easier to grow.

Getting to the point where you can take on that first employee seems to be an insurmountable obstacle for most one man bands offering a service. A bit of a catch 22 as having an employee would save you the time you need to grow the business enough to take on that employee. Once you have that first employee you just got an extra 35 hours a week to trade for your client’s money and more time to concentrate on growing the business, making employee number 2 a lot easier and so on.

Two’s Company

There are many advantage to starting with at least two people. Here is some of the maths:

  • Two people means you can get twice as much done. Each person only needs to do enough to cover half the salary of that first employee.
  • Two people means each can specialise is slightly different but related areas. For example one person may specialise in web design and the other in website marketing. This means you may be able to target bigger clients.
  • You will know twice as many contacts between you meaning twice as many potential clients and twice as many potential referrers. You can also spend twice as much time between you both developing contacts.
  • You could offer Two different services to each potential client meaning you will probably generate twice as much business from all your contacts i.e. someone that doesn’t need a website may want marketing.
  • As each person specialises more in their particular area instead of trying to do a bit of everything they can each charge a higher rate per hour for their specialist areas / provide more value per hour
  • You will have twice as much access to finance if you are both financing the business personally

These advantages create a compound effect. For example having twice as many contacts and twice as many services to offer each contact means four times more potential business, multiplied by all the other benefits too make it much easier to get to the stage where you can take on that first employee.

There are other advantage too like having another person’s experience and perspective, having someone else to bounce ideas of, being accountable to someone else which means increased motivation. Your best and biggest clients will be better and bigger too as they came from a pool of twice as many contacts.

Research on what is called the Unicorn Club looked at all businesses in the last 10 years that have been valued over a billion dollars. The only common factor that applies to nearly all of them is that they were all started with teams of two or more people that had years of history between them. And these weren’t service based businesses in the traditional sense, most of them are software based like Facebook, Uber, Groupon and Yelp. So the advantages of multiple founders goes beyond the obvious mechanical points I mentioned above.

What Should You Do?

So what should you do if you are on your own providing a service? Don’t despair, here are some ideas that should help:

  1. Track time. In this type of business it is even more important than tracking your finances. You should track what you spend your time on and apply the same analysis you would to your finance. For instance, you should calculate carefully for everything you do your return on time invested (ROTI). Including how much you are making from each job / client per hour, your return on different services you offer, and how much you get back from different marketing activities. Where possible spend more time on what provides the best return and less on what provides a low return.[Side-note, why time is more important than money: If you spend all your time and haven’t made enough money you have very few options. Whereas if you have ran out of money but have 20 hours available in the week ahead at least you have the time available to try and make more money]
  2. Consider outsourcing activities as a halfway house to taking on that first employee. Especially if there are areas where you are weak that you think someone else may be able to provide a better return. This may mean outsourcing a part of the actual service you provide or outsource something administrative that takes up a lot of time like your marketing.
  3. Leverage IT and software as much as possible to improve how much return you get on your time. This could mean specialist software that helps with the service you provide, or making better use of standard software to save time like spreadsheets and accounting software. Anything that makes you more proficient at your service or at your admin and business generation duties.
  4. Try to expand in to areas that aren’t as time dependent. Like offering a product related to your industry like a book or an online course. Something that you can offer to existing and past clients will save time on marketing. It only needs to subsidise your existing income enough to get you to that first employee. A product like this can also help bring in new clients for your main service so it can be used as a marketing tool.
  5. Duplicate. Look for ways you can duplicate your effort. For example Solicitors use template contracts. You could design websites, provide marketing or manage finances for the same type of company so that you are reusing things you have spent time on. You may also gain efficiency by doing all the work together for instance if you were running a social media campaign for a dentist locally and one elsewhere in the country (so there is no conflict of interest) then they may be happy for you to post the exact same thing on both their social media profiles most of the time, you could use software that does this automatically.
  6. Make overlap. This is where you make alternative use of assets your business has built up such as it’s client base / contacts, your ability to deliver a particular service, any software you have paid for or any systems you have built. For example, a personal trainer with hundreds of past and present clients and relevant contacts would have an easier time setting up a group exercise class as he can market it to existing contacts. He may also be able to use the same equipment he normally uses for clients and the same facilities. Essentially you are looking for a way to generate income more efficiently than someone just starting up a new business, by re-purposing assets you have already built up, providing a better return on your time.
  7. Try and get friends or family to volunteer some of their time and pay them back at a later date once you have that first employee. Show them this post to explain why you need their help!

I hope you found this helpful. Feel free to comment with any ideas of your own that may help service based businesses.

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