Have you ever looked at the profit margin in your small business, been satisfied, but found yourself asking, “How do I grow this without risking my margin?” If so, this article is for you. We’re going to break down seven proven processes we’ve seen work for growing service-based businesses.
1. Standardize Processes and Documentation
As the owner, you should be looking at strategic ways to a) increase the impact of every dollar, and b) increase the value of every minute you work. SOPs (Standard Operating Procedures) fall more in the b) category, as they help you create more efficient operations over time.
Implementing SOPs can be difficult at first, especially as you’re growing your business from 1 or 2 key employees to 3-5+. You may have experienced this yourself, as it seems there is a diminishing rate of return for taking the time to create SOPs when your team is smaller than 3 core people. It’s difficult to measure the impact of standardizing processes when so many things are new to you and new to this stage of the business.
However, documenting operating processes to create a knowledge bank that can be given to new hires can prove its value by decreasing the amount of time you have to take when onboarding new talent. It also helps with management tasks, as you and your hire have a baseline to work from and reference.
The rule of thumb that we’ve found to follow relies on a simple question to determine whether you should standardize or wait. That question is, “will I need to do this again in the next 30 days and will my life/work/business be more complex then than it is now?” If the answer is yes, create the SOP. Otherwise, you’re probably better off using your time to focus on revenue creation and growth opportunities.
Some of our favorite tools for creating an SOP Bank are highlighted below:
- Asana – Project management, automations, repeating tasks.
- Notion – A project management and note taking alternative.
- Google Docs – Shared docs, sheets, charts, etc.
- Slack (new feature September 2023) – notes, to-dos, automations.
2. Leverage Technology for Growth
Every business owner can use some form of technology to make their operations more efficient, accurate and impactful. When assessing what technologies and tools are going to help you, we recommend that you start by defining your ideal outcome.
Ideal outcomes help to create the use-case scenario and that alone can drastically help you narrow your search for the right tools at the right price for what you need. We’ve seen the use of technology taking different forms for different businesses, but in most scenarios the core principal remains the same: reduce friction, increase measurable data, identify opportunities.
Reducing Friction in Operations
Automated task management and friction reduction are valuable to growing small businesses because they significantly decrease human error and the time spent communicating redundant information. We use tools you’ve probably heard of (Make and Zapier) to connect softwares and reduce manual communications around complex and simple tasks.
Most people we speak to (including our own team) have a hard time initially defining what their low-effort, high-impact automations are going to be, but once you get in the swing of building out automation processes, it gets easier to tie business impact back to processes and systems.
An exercise you may find valuable for identifying your low-hanging fruit for automations is filling out the following diagrams. I promise the simplicity of how they look is not as simple as they are to complete.
(Pardon my crappy diagrams, I know we’re a design-driven firm, but honestly, I’m in writing mode…)
Hopefully these won’t take too long to fill out, but at very least, expect about an hour of deep thought and brainstorming to do this right. (If you get it done in under 10 minutes, shoot us an email… we’re hiring system automators and you may be a good fit 😉 )
Once you’ve defined your starting point or lowest hanging fruit, start the process of trying to automate one process per week. You may be tempted to go much faster, but doing it right, especially with complex softwares, is much more valuable than doing it fast.
Slow is smooth, smooth is fast…
If you want guidance on setting up your system automations or recommendations for starting points, give us a holler. We do free consultations for qualified owners looking to get started on their journey.
3. Hire and Train Skilled Staff
It’s amazing what A players can bring to a business – especially if it’s a small business that has a lot of room to grow. Now, you may be thinking “I can’t afford to hire A players, they’re expensive, right?!” It depends… Just kidding.
Hiring A-Players is a non-negotiable if you’re building out your team and key leaders. Just because you may not be hiring a full-time, key-leadership role does not mean you should settle for anything other than A players.
A players are better for the business in every way, shape and form. Measured against B players, A players out-produce on every level. Be forewarned however, attracting A player talent is less about what you pay and more about what your environment, opportunities, culture and management/leadership looks like.
You could pay A players 2-3x market wages, but if you lack the culture and leadership fit, then don’t expect them to stay long. So much of hiring the right people and training them to excel comes down to YOU and your ability to lead, implement and grow the business as a whole.
A great resource I recommend to any business owner or leader is the Topgrading book by Bradford Smart.
Bonus:
One of the most impactful questions I tend to ask fellow founders and owners is “If you had to hire yourself for the role you’re in, would you do it?” More often than not, the answer is a resounding “Oh, sh*t! Probably not.”
Look in the mirror and decide if you’re willing to become the person & leader that is needed to get where you want to go. If you’re unwilling to become that person (continually), then that’s okay… just know when to get out of the way and let someone else step into that role.
4. Build Better Customer Relationships
I’m always amazed when small businesses we speak to have no database of customer information for business development purposes. Not only do they not have a system in place for growing their business, but they have no way to quantify opportunities to expand their services (see point #6 below).
If this does not apply to you, then skip ahead. However, if you don’t have any form of business development system in place, i’s time to develop one.
There is no one-size fits all approach to business development, however I have found that a combination of team empowerment (commission on closes) and owner-led initiatives tend to work well, (especially if this is your first go-around).
On top of the right team structure and incentivization, it would be valuable to get a lead-generation engine in place. This engine will look different depending on the industry, service or product, however if you”re considering cold email, check out our DIY set up article here for a complete cold email launch.
Track your data and monitor opportunities. Great deals are born from simple conversations. A prudent business development specialist will know that the better you know the prospect, the better deal you’re likely to create. Never wait for deals, create them.
Side note:
There’s a big difference between the mindset of sales vs deals. Sales drive revenue, deals drive growth. You need both to be sustainable. Different businesses / business models will need to rely more heavily on one or the other, but in general, find what works for you, then hone in on how to create more.
Typically, a great sale, with follow on service will become ripe grounds for a great deal. Likewise, a great deal can lead to fertile opportunities to sell more to the same customer. Win, win.
5. Changing Pricing Models
Having trouble growing your business, but haven’t looked at your pricing models? Ring the opportunity bell… Every business has it’s phases of growth that necessitate the adaptation of pricing in order to support business needs.
I’m not just talking about increasing prices to inflate profit, I’m talking about examining your business model and defining what the most strategic opportunities are for you to turn scaling costs into fixed costs, one-time-purchases into recurring and finding margin within your existing contracts / products.
Profit, products, costs, overhead are all data and with enough knowledge you should be able to define a formula that maximizes the value you’re seeing (and giving) in each area.
For example: imagine a company where 50% of their new revenue (and over 65% of annual profit) was coming from up-sell / add-on contracts, but their main focus was selling the small product at a profit. If we deconstruct even further, we’d discover that if they increased their amount of upsells by 20% that their total profit would increase by 7%.
If we knew that dropping prices on the primary product by 10% allowed us to increase our sales in the add-on contracts by 20%, we’d be looking at a win-win. Of course the numbers have to add up (always do your math), however the main point here is to ask yourself the question “how would I increase margin in my business without increasing my sales?”
6. Expand Your Service Offerings
If you have a business, you have customers. Hopefully your customers love you, because you serve them well. Maybe you serve them really really well in one specific thing, which makes you the BEST at that one specific thing and you’ve never taken the time to look at how you can extend that service to other areas of their business.
For the record, I think every business should expand their services only at the right time and for the right people – so use your own judgement when applying this.
Let’s work on a hypothetical. Suppose you have 20 quality customers that pay you regularly for service X. They also pay or purchase a somewhat similar service, Y, from another vendor. You know the general price they pay and you know they are satisfied with that vendor, but not ecstatic about them.
If 10 of your customers would switch to a new vendor with better pricing and service, then you know there are 10 customers you can attract in 3-6 months for a new value-add service. Lets assume you can offer the same service for 10% less than the current provider and back it with your quality guarantee, while maintaining a 15-25% margin.
To go a little deeper, let’s look at a few situations in the chart below for what makes sense to pursue as a service extension:
As a rule of thumb, if you have less than 100 customers, look for opportunities that fall within the 50%-150% range of your current pricing. Anything that’s too small will not create enough revenue, anything that’s too big will become too much of a hassle to manage.
Alternatively, if you have hundreds of customers, measure the value of add-ons by % increase to revenue and profit margin. 200 new customers each bringing in $50 a month of profit makes sense.
7. Refine Your Marketing and Branding
What would this article be without the mention of marketing and branding? After all, we are a design-driven marketing firm that specializes in helping B2B companies grow…
Well, for starters, let’s break down how we assess brand and marketing opportunities for small businesses and B2B companies. The most important information we seek always has to do with the following:
- Who are your customers?
- Where did they find you?
- How much interaction to they have with your brand?
- How much interaction do they need with your brand?
- Where are the gaps in your brand & collateral?
- What is the lowest hanging fruit that will have the biggest impact on your customers?
It’s important to assess the whole situation and measure your findings against what you want to achieve. Many owners (and unfortunately marketers) make assumptions about opportunities based on what they see, not based on the data. Whether its for B2C or B2B, the goal of marketing is twofold:
- Guide & educate customers towards a purchase.
- Grow your audience through TOF (top of funnel) expansion.
I encourage you to take some time thinking about where you can capitalize on this. Try mapping your customer journey and see where there are holes you can fill. Ask your loyal customers for feedback. Try some anonymous surveys to get unbiased feedback and shatter your assumptions… (remember, assumptions are dangerous, especially is marketing).
Closing
If you need a helping hand implementing any of these 7 tips to grow your small business, don’t hesitate to reach out. We have growing team of highly-skilled and experienced business marketing professionals that are here to help you reach your goals.
Keep an eye out for our Small Business Growth Playbook which should be releasing sometime beginning of 2024. This will be a free, long-form book for any business owner that wants to take our exact framework of growth and go through / apply every exercise on their own.
Thanks for reading!
