Many founders I’ve worked with who started a service business went out on their own to control their destiny and make more money. Unfortunately a lot of them hit a wall between $300-500k annual revenue, and 10-20% profit. Marketing, legal, landscaping, consulting, design, construction, etc – they all face it.
How do you avoid that plateau and push through to the promised land of big profits, a more sufficient team, and stability? Here’s how to spot those costly mistakes and avoid them.
1. Slow invoicing and cash collection.
- How it happens? 3 days becomes 3 weeks, and you don’t get paid until +6 weeks after the work is done. Tracking time sucks and we procrastinate. We look at the checking account balance vs forecasting cash flow.
- Why it matters? Cash is king! Slow cash means you’ll be gun shy to invest and grow. You’ll train bad habits with clients. And as you grow the wait for cash will hurt more with payroll and vendors.
- What to do? Streamline billing where possible. Productize services and auto-bill monthly. Don’t take checks and willingly eat 1% merchant services for faster cash. Pay your bookkeeper extra to help you get invoices out on time once a month.
2. Missing on a key hire.
- How it happens? Bottom line – you rushed it. Too much work and not enough bodies…so you found a body. You didn’t slow down to interview properly and talk to enough candidates. Maybe you hired a friend or someone you knew who wasn’t the right fit. And we definitely didn’t properly train them.
- Why it matters? You had too much work, and now you have work not being done right hurting your reputation. The worst part is we might know it’s the wrong hire and let the problem linger for months. Drain on time, culture and resources.
- What to do? Slowwwww down. Triple your candidates and double your interview time. Remember the old saying ‘hire slowly, fire quickly.’
3. Not trying to hire again when above happens.
- How it happens? We missed on a hire and NEVER trust employees again. We become salty and jaded. We try to do everything ourselves.
- Why it matters? Get back on the horse and figure it out, or you’ll always have a small business and burn out. The end.
- What to do? Learn to get better at hiring and remind yourself sometimes it’s a numbers game. Especially with salespeople – you’re lucky to have a 50% hit rate. (follow up post coming on this!)
4. Lackluster Website
- How it happens? Started cheap or did it ourselves. But then we kept thinking we’d have a pro do it or get around to it. Years have passed and it’s not doing you any favors.
- Why it matters? Time and money; money and time. Prospects make a snap judgement in 5 seconds if you’re legit – even if they were referred to you. Most decision makers process visual websites better than they can your initial verbal sales pitch. Plus you need your website to do some selling for you because now you’re busy.
- What to do? Think of it as a key employee and PAY UP. Hire a pro for $3-10k and hire a copywriter while you’re at it. It should be a look at where your biz is going, not a relic of where you were.
5. Not Raising Prices
- How it happens? When you started you might’ve competed on price to land the work, or you have a hero complex and keep honoring those same prices. Maybe we’re afraid to lose a potential client due to sticker shock.
- Why it matters? Competing on price is as effective as arguing politics on Facebook. As you continue to get better you deserve to charge more. And you’ll need margin to cover overhead, staff and being able to pull yourself out of billable work. Plus you’ll need to pay for that fancy website mentioned above, duh.
- What to do? Incrementally raise prices. Create some value based pricing. Roughly 1/3 of your prospects should have a little sticker shock or you’re too low.
6. Yo-Yo Marketing
- How it happens? You try some marketing tactic (i.e. email) for a couple months then stop it. You try a different tactic (i.e. FB ads) for a month then stop it. You heard about another tactic (i.e. conferences) works so you try it, then stop it. You never let it get steam and you’re most likely not tracking it. You only remember the referral leads and think word of mouth is the only way.
- Why it matters? You have to get something driving revenue besides the founders hustle. Period. A salesperson or marketing funnel need to create deals or we’ll hit the wall and burn out. Plus if we’re lucky to have lots of leads, we can cherry pick ideal clients.
- What to do? Set aside a % of the budget and market consistently. Try multiple tactics. Track conversions and get a simple CRM like Copper or Pipedrive.
7. Lack of calendar control
- How it happens? We get addicted to our inbox and putting out fires. Days flash by where we felt really busy but didn’t get anything done. Interruptions, meetings, drive time, email, admin tasks, etc suck time away from high priority items.
- Why it matters? Scaling to $5-10M can be summarized by being proactive instead of reactive in your business.
- How to do it? Create focused blocks for critical tasks and planning. Turn off notifications. Delegate and automate. Have a clear vision that gives you the willpower to say no to low priority items.
This is all easier said than done. A couple of these posts could be long form case studies by themselves. I’ll do a follow up on #3 on and lay out how to de-risk the key sales hire. The good news – if you hit that $1-2M mark with some half decent habits, the fly wheel can crank to +$5M with much less pain and suffering.
