GROWTH MODELLING IN SERVICE-BASED BUSINESS
Growth Modelling in Service-Related Business
Growth is what we want and need, but many people botch how it is achieved. Instead of simply putting all our focus on the bottom line, trust your Finance department to monitor and report. Don’t allow your Financial department to determine what you spend. They need to be viewed as one part of the puzzle. Let them do their job but don’t ask them to bear the responsibility of your gains and losses.
There is an old adage that is very true. “Sometimes you need to spend money to make money”! There is also a much bigger picture at play. The bottom line only represents an outcome. The trick is in defining and refining how we make success happen. Not leading with the budget, but modelling potential for growth and implementing it.
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Here is a typical model of how most business manages its growth. The problem is, that what we are looking at here is purely based on budget rather than vision. More often than not, reacting to the budget rather than modelling a way forward simple maintains a status quo. Like taking out the yacht but hauling in the sails because you don’t want them getting wet.
Let’s look at it another way. Does the time of day help us achieve something or is it a mere interval?
With that being said, Let’s think of the triangle above as a consequence, not what has to happen before we act.
The real question is how do we get there. Your choice in how is up to you, I would however advise against wants based modelling, unless done in moderation and in line with operational needs.
Now let’s look at these 18 stepping stones to success individually. Be careful though. If we step on the wrong one, it’s a bit like one of those treasure hunt movies. If you step on the wrong stone, you set off a booby trap.
How to increase revenue
1.????Source a cheaper supplier and minimize Logistics.
Simple enough. Things to be weary of though. Can you do it cheaper and maintain the level of quality that the Client expects? Is the quality going to tarnish your professional brand? If it does, it could reduce the number of people buying your product or lose you a Client. Don’t get me wrong. Many companies make a lot of money this way. Let’s also consider the effects of off shore trading. It has become the norm but what has happened as a direct consequence is that jobs have gone off shore too. Australia’s Car Industry is a good example of this. In which case, a lot of 'End Uses' can’t afford quality product, so it looks like they have to settle for the cheaper product you may be offering. Therein is you target demographic.
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2.????Produce More with less.
One way this can be achieved and seams to have become a norm, is outsourcing tasks. Therein reducing overheads. This century has proven to be very service driven. New purpose-built industries to assist host companies. HR, IT, Recruitment, IR, RTOs and other support-based industry to counter the effects of Lean Processes Management styles. Lean Processes are another way we can produce more with less. Personally, not a fan. I prefer to invest in success rather than add another notch on the belt of a starving business. My mind tends to wonder to images of prisoners in concentration camps. There is a difference between Kazan and Lean Processes. We need to be mindful in considering if what we take out is an improvement or something we should not have tampered with.
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3.????Remove steps and remove overheads.
Getting rid of a person means less equipment running. That could save us money while at the same time loose us revenue. Something we need to weigh up on its unique merit. I would advise caution though. Like a house renovation, if we want to remove a wall, when need to ensure its only function was to partition a space and not a structural support wall. One tale I believe should be shared in Business Diploma studies is a children’s Fable written by Aesop’. I recommend you give it a read and consider it every time you want to remove something from the workplace.?https://aesopsfables.org/F103_The-Hedge-and-the-Vineyard.html
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4.????Brand Building and Repeat Business.
Cannot understate how important this is to business growth. Get a bad reputation and people won’t do business with you. Brings to mind another Aesop’s Fable https://aesopsfables.org/F228_The-Boy-Who-Cried-Wolf.html This next link represents what happens by reputation https://aesopsfables.org/F28_The-Hen-and-the-Swallow.html Word gets out about the quality of your business and the network gets to work. If your brand and reputation is good, business will grow, if you brand and reputation is bad, you could find yourself knocking on a whole lot of doors that wont open for you.
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5.?????Marketing
We could sit at home with all the lights off in the hope that one day someone will call. Or we could try a couple of other things. Direct Marketing and or passive marketing.
a.?????Direct Marketing speaks for itself. The who, what, where of your business using conventional marketing tools. Website, attending expos where you know a lot of potential Clients will be visiting, that kind of thing
b.?????Indirect marketing is done more regularly. Posts on LinkedIn that bring attention to your website or remind people that you are still around. In having a website, you have to sit and wait for someone to see it. If you post articles, use social media, tic-toc, etc., you are placing yourself in full view. I call this indirect marketing because the objective isn’t to advertise your company, its indirect subject matter that reflects the company brand. What you believe in and ideals you support. This also helps in filtering the people you want contacting you.
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6.?????Canvasing
Canvasing requires you to invest time in it, or employ someone else to spent time on it. ‘Time is Money’! Yes, it costs both time and money, but it makes you money too. Even in this modern world we still need to make our presence known. Lots of ways to do this. Brand building/advertising is one. Networking another. We could also do it with a mix of old school and new school. Jumping on a phone, knocking on a door, connecting online with a message. Some people use the pitch, hook and close method. I prefer the John C Maxwell method of listen, establish needs and pain points, offer solutions and/or services to support those needs. We still require an opening pitch though. This may be stimulated by why you selected the person you want to speak with. One thing I have practiced for a long time has and will be servicing needs over money. All about providing solutions instead of having your hand out stretched for money.
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Kerwin Rae talks about how investing time gains respect:
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Increase Rates or Margins
7.??? Give Assurances, Land the Contract at Any Cost
Quick example before I proceed. I loved the Tower Burger from KFC. When they stopped making it, I stopped going. Then they said it was back for good. I went into a KFC to get one. No longer on the menu, I turned around and did not return for over a decade. Still no Tower Burger. Where's my Tower Burger?
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In order to get the money, you are after, you may need to broker an agreement that will place more pressure on your own business. Please ensure you are able to meet those demands/promises. If you can’t, you may as well be selling ‘Snake Oil’. It is of course up to you, but I don’t compromise effectiveness for the sake of some extra cash. In order to meet the demands, you may find you need to put another person on your pay role, outsource or possibly fail to meet what you promise. The Client may be a gold mine. However, that gold mine may choose to do business with someone else if you can’t deliver on your promises and it could also affect your brand. It is critical that you understand the capacity of the business and the desired workload of the Client before signing that contract. Perhaps it would be wise to have a contingency plan in place before meeting the Client. Part of which may include a table which indicates increments of additional personnel costs against margins. Please ensure you can back what you promise.
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8.????Change Target Demographic
With this model we are only chasing contracts that are going to be paying the rates we desire. Not as hard as you might think. Afterall, our Service/Product is unique to what we do. Finding the right Clientele is a matter of matching what we have with what they want. However, we may need to customize the product with greater refinement to meet that match.?
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9.????Add Service Costs to the Contract
Not uncommon. I remember when we were about to buy our first home, we were all set to go, then we were told we had to pay for a whole lot of things that we had assumed were included in the initial price. We walked away and bought a home with someone else. If you add costs in a deceitful manner, you are not doing your business any good.
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10.?Avoid High Maintenance Clients. Know when to say no and when to walk away
Avoiding this kind of Client helps us mange our losses. In servicing needy Clients, we have to over dedicate our services and our operational costs in doing so. Contrary to point 7, this is all about managing the workload and expense. It can be futile when you acquire a Client that demands all of your time and saps your ability to properly service other Clients. It was going to say ‘can be’, but compelled to say it ‘is extremely’ detrimental to your business and your brand. I have seen the effects first hand and strongly urge that you should avoid high maintenance Clients at all costs. When meeting with such Clients for the first time, go in with a plan. Agree to reasonable requests, but also have points that you are not prepared to compromise on. There needs to be a point where you need to tell a potential Client that you can’t help them. Need to be happy to walk away. Highly recommend and support this video by Kerwin Rae https://www.dhirubhai.net/posts/kerwinrae_the-biggest-mistake-people-make-with-sales-ugcPost-6809734936644476928-HfrF If the task is outside of the scope of what you offer, tell them you know someone else that can help them out with their needs and refer them. This too builds respects and they will be quick to refer you to other business that you are more closely aligned with.
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11.?Deliver on Quality
Simple stuff here that I don’t feel needs much explanation. If we have a product that is of quality, we can ask for a price that matches what it is worth. The trick is in pitching it’s worth and how it is worth the expense to the Client. Once we have provided the product and it does what we claim, and demonstrates it’s worth, we can get testimonials and referrals. With Clients saying that it is worth it, you will build the quality/reputation of your brand.
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12.?Improve Value
If your product/service is not of a value that meets the asking price, we need to either improve the product or provide additional value in another form. Very typical technique. Two for one sale being one example. The trick of course is in balancing expense against value. It may take the form of investing time; in which case we need to consider point 10. Having said that, this is something where we can practice thinking outside the box. This is where you might want to put together a focus group with your most agile minds. What value can we add at minimal expense?
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Cut Costs
13.?Decommission Personnel
Quite often this is a go to with Lean Process Practitioners. It is far more common now days to have external service provision. Far less specialist roles within business than what we had in the 1990s. We now have the Office Allrounder. It is telling. Having said that, it also puts a lot of people who are employed on notice to lift their game. A lot has happened due to influence/change caused by The Lima Trade Agreement, Technology and Lean Processes. One example when factories were more common in Australia was the abundance of Cabinet Makers. With flat pack furniture now taking the fore, we have far fewer Cabinet Makers. We do however have a new role; Shop Fitters; who put flat pack together. One example of technology is we now have chat botts. Where have all those receptionists gone?
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The more we cut people lose the less inhouse skill we have and less InTouch those we commission externally to perform task within our business. Your business will have nuance that people outside of those internal roles would not appreciate. Nuance that you need to gather feedback from as part of your operational needs.
Having said that, we cannot escape change. It is here if we like it or not and as a consequence those who we source externally specialize. That is to say, they make it their business to be the best resource around. Naturally, there are those who have no business calling themselves Subject Matter Experts, while concurrently there is some Top Shelf, real expertise out there and a full gambit of skill that sits between. The trick of course is in recognizing who the real experts are.
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14.?Create a Cheaper Product
We need to differentiate between creating something cheaper and doing something on the cheap.
We need to not compromise the quality of what we provide. We may however look at what is costing us money that is unnecessary or finding another method that is more efficient. The go to is usually removing something. The irony is that it is often what we add that creates efficiency. Although many a time I have seen efficiency choked by additional policy or work practice that did not belong. As such we must proceed with caution and consult with workgroups/personnel that know the true nature of the workplace. This is a counter point raised in point thirteen. This cannot be done arbitrarily. We should form a steering committee to deliberate on what is viable in creating greater efficiency and effectiveness. Do we need to acquire a new piece of equipment, a customized program or adapt a new practice? Conversely, do we need to consolidate a department, remove a policy or outsource a work function?
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It is important to have KPIs and other monitoring tools. Be minded however that these are tools that tend to be misused. KPIs are a way of collecting information, but often used as a compliance tool. When used as a compliance tool the tendency is for employees to aim to hit KPIs. The problem with this is that the focus of the employee is shifted to the KPI instead of the intricacies of the role. Things get neglected. Additionally, when a Supervisor is burdened with having to hit KPIs they have to choose between assisting the team, (Which after all is their role), or hit the KPIs. Another example of the misuse of monitoring tools is when we use a ‘Time-Motion Study’, to assess a task that is quality driven. The assessment tool here needs to be one of accuracy, not speed.
15.?Adopt Lean Processes
Have you ever played Jenga?
Lean processes are a little bit like that game. In fact, Jenga is exactly what lean processes are like. We try to construct a streamline structure to reach great heights by removing things and replacing them. Just like Jenga. Though it has become a necessity in a 21st Century world in which we cannot undo. I do advise extreme caution in what you remove from your business.
Additionally, we need to properly assess the quality of the Service Provision that we outsource.
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There’s a hole in the bucket.
Great nursery rhyme on multiple levels
1)????Lesson for Business Owners and Managers:
It is a lesson in expectations and lack of facilitation. Henry can’t fix the bucket because he doesn’t have what he needs to fix it.
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2)????Lesson for Managers and Leaders
?A lesson in lateral thinking and problem solving. If we can’t bring water out of the well to the wet the stone, why don’t we put the stone in the bucket/ or tie the stone to the rope and lower the stone into the well. Now that we have a wet stone, we can sharpen the axe/knife and fix that bucket. Alternatively, we could buy a new bucket or find an alternative to the bucket. We can look at this in the same way we would approach Risk Management; Hierarchy of Control: But instead of Remove, Replace, modify, Isolate, legislate, PPE, we should: Communicate, Facilitate, Supply, Support, Empower, Enable. Add, Improvise, Enhance and Monitor. The link here is just the song for those who aren’t familiar with it: https://www.google.com/search?q=sesame+street+there%27s+a+hole+in+the+bucket&oq=Sesame+Street+there&aqs=chrome.0.0i20i263i512j69i57j46i512l4j0i67j0i512j46i512j0i512.45434j0j15&sourceid=chrome&ie=UTF-8
?Of course, if the stone is as large as the one in the video, We need to consider the load binding limitations of the rope and pully system.
Steven Covey also talks about sharpening the axe/saw for personal growth. I see it as a far bigger lesson that extends to Management. A lesson in the important of adequate facilitation.
It doesn’t just apply to manual labour either. The axe/saw could extent to a computer program, process, policy, work practice or any other kind of workplace requirement.
Let’s take a look at some scenarios with that axe/saw.
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1)????Situation: You set the task and provide the employee with an ineffective tool
Result: The task takes far longer than it should and your employee is exhausted. Maximum effort with minimal output.
2)????Situation: This time the axe is blunt and has a broken handle
??????Result: Maximum effort, little effect, possible injury
3)????Situation: No equipment provided can lead to two scenarios
Result: No output or the employee takes matters into their own hands and gets things done despite poor Management and in absence of Leadership
4)????Situation: You hand the employee an effective tool
??????Result: Little effort with high output until the tool goes blunt. Then we are back at situation 1.
5)????Situation: Management provides both a sharp tool and a means to re-sharpening it but push to continue working and not allowing time to sharpen the tool
??????Result: The same as 3 and they will resent you for it.
6)????Situation: Have a sharp tool, the means and allocated time to re-sharpen it but the employee that has been sourced doesn’t have the skill set and/or has not been adequately trained
Result: Inefficient/ineffective, low output, probable injury, bearing in mind, that if it is something like an admin role, stress can also lead to harm.
7)????Situation: You have done everything required in facilitating the employee, they just don’t fit the task.
Result: Pour output and possible injury, Management blames the employee. Guess what, it is still on Management for two reasons. They had not assessed and refined the operational needs and they have not ensured the person that was applied to the role/task was adequately aligned to that task. If an external Recruitment agency is used, then that falls on both of you if you have failed to convey what is required and the consultant fails to ask.
8)????Situation: Employees are facilitated with equipment, means, time, training
Result: High level of output with minimal effort on a consistent and ongoing basis.
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16.?Omni-Directional Communication, Monitoring and Feedback
As part of any business strategy, the tools to assess should be in place before commencing business operations and if there are any new practices added, the assessment tools should be added accordingly. One thing that is essential with any easement tool is that we need to assess and evaluate the tool itself. Part of which is consulting with Work Groups. They should be able to give you feedback relating to operational needs. Quite often policy, process, and procedure are modelled on what is desired as opposed to what the company actually does. When we get this wrong, it’s like trying to thread a needle with brick. One thing I have learnt over many years of using hand tools is we need to guide the tool, not control it. Let the tool do what it is designed to do freely.
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Feedback and communication is critical. I’m not talking about Management giving directives. That is a small part of it. Communication needs to be omni-directional. It needs to be delivered to Workgroups. Feedback needs to come back from Workgroups. Workgroups need to communicate with other Workgroups. Department need to communicate with each other.
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17.?Understand, Monitor and refine operational needs
Once we have gathered all the information, we need to make change, we need to assess and understand it. Steering committees need to be formed and made up of people from various cross sections of the workplace to promote clear and informed discussions.
I can recall standing with a group of truck drivers. Between them they had in excess of 150 years’ experience. I put forward some points that needed to be addressed to our HR Manger. To which she replied; ‘That’s for the experts to decide’. I replied; ‘We are the experts.
The point is. Don’t presume that you have people in your workplace that are uneducated. Education comes in many forms and life lessons are a window into a world that we don’t all get a chance to look through. We should take advantage of what knowledge is captured at the pointy end of the business.
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18.?Invest in improvement
Guessing your wondering why I would consider ‘Invest in Improvement’ in a ‘Cutting Costs’ category?
Ironically it is the best way to cut cost. Every effort you make to enhance your effectiveness or desirability to the Client, is like buying shares. Like shares, success has the capacity to compound. People don’t buy a gym membership to get sweety. People don’t buy books to stimulate their eyes. People don’t buy tools to create clutter in their workshop. They spend money on improving themselves. The same should be true in business.
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The list goes on, but I’m sure you can see from this list that spending money and investing time has a positive effect on your ability to generate dividends.
Failing to invest is like expecting to win a race you aren’t competing in.
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Decisions based on a dividend mindset has us sitting on our hands and only doing what we need to survive.
In a business that fails to invest in its own growth an environment is created where you cannot retain employees. They won’t stay in a business that won’t grow because it provides no opportunities of growth for them. There is no doubt in my mind that this is the leading reason for people leaving. There is an air of pointlessness that stinks up the workplace.
Acting on what we have instead of planning our next move creates a stagnant business. We all know that if we drink stagnant water, we get sick. The same is true with a stagnant business.
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Built your business, manage it well and the profits will come.