Once you get your company up and running, you may find that it is difficult to scale your business based on your original product, service or pricing model. In order to break free, you must find ways to support and augment your existing business with other revenue streams and rethink your overall approach to selling.
Step 1- Think About Value You Are Delivering, Not the Hours
A common mistake I see in working with companies that are struggling to grow is that they are not charging enough for what they do.
Instead of determining your prices based on inputs, your pricing should take into account availability and value. As you get better at providing your product or service, you will deliver it faster and with greater accuracy. This efficiency is not a reason to offer a lower price–in fact, it may be a reason to increase your prices.
You only need to look at what lawyers and plumbers charge for their services to understand this model. They build in an opportunity cost for their availability and specialized training. Make sure you allow for margin in what you sell to bring on new staff and train them. If you are only ever covering your costs, you will never have the money you need to grow.
Step 2–Find Ways to Cut Costs
Just as important as making sure you are charging enough is to determine a way to cut the costs of what you are producing. If your company is “renting” any part of what it takes to deliver your product or service, see if it makes sense to own that part or if you can strike a better deal when your volume grows.
When I perform research in other cities, I need a television in the facility I am using to show advertising or discuss screens. The facilities I use charge ~$500 a day to rent a television. Instead of paying such a high price, when I arrive in town, I go to a local store and purchase a TV for $250. After I am done, I donate the TV to a local charity. This simple adjustment can add $750 to $1250 to the bottom-line for each project.
Step 3–Create Packages or Levels
Turning your products or services into packages or levels with an easy way to upgrade accomplishes two important goals.
In the explanation of the packages, your customer 1) gets a better idea of all of the work you are providing at their current level which can sometimes be lost over time and 2) they gain an understanding of what is available at other levels. This transparency allows your customer to determine when it might be time to move up to a higher level of service and it reduces the sales cycles necessary to build that awareness.
Step 4–Create Recurring Revenue
If you are constantly worried about how to pay the bills every month because what you produce must be sold each time, you will never be in a good position to move your company ahead. The only way to address this problem is to create recurring revenue.
If you think your business can’t accomplish this goal because of what you sell, you only need to look at emerging business models like Dollar Shave Club to think about how a recurring revenue approach might work for your business.
Dollar Shave Club has created a recurring business model by providing men’s shaving supplies on a subscription basis. This “supplies on demand” is a growing trend that will dramatically impact how we all shop for and receive products in the future. The approach provides Dollar Shave Club with a predictable revenue stream each month that allows them to concentrate on growing their business.
Step 5–Establish Key Business Partnerships
One of the best ways to grow your business is to establish a set of relationships with other companies that can sell your products or services for you.
Crystal, a provider of network management systems for media and satellite, uses a network of oversea partners to establish and grow their worldwide presence. One of the hardest things to figure out about any growing business is how to create reach. Crystal has addressed this problem by extending their reach to untapped markets without the overhead of new facilities or expensive headcount.
As you move into the new year, think about your business differently in order to find simple ways to create explosive growth.