Most business owners think that the only way to make more profit is to increase client numbers!
Well let me explain to you that this is not always the case and in a well thought out change you can actually achieve higher profits in your business with fewer clients. With fewer clients you can make your business more efficient too and if you go through this process you can then re-think about expanding your business in a different way. Look at this as resetting the foundation of your business in order to rebuild and grow it in the right direction. As with anything, a solid foundation is essential for a strong and stable structure.
A few years back in one of my businesses I made the decision to triple (yes that’s right triple) my prices on one of my services. At the same time I modified and improved the service for the clients. I took a gamble on the basis that not all of my clients using this service would leave. I calculated that if I lost around 20-30% of these clients I would be left with a lower number of clients paying me more money and have a business being more profitable.
Let me tell you that this gambled paid off, yes of course some clients complained bitterly and some clients left, but not as many as you would think nor as many as I thought would leave, in fact around 10% of clients left in the end. What is interesting to note is that in those clients that decided to leave were the ones that were the less profitable ones and the ones that gave us more hassle.
The great thing is, as a result of my actions I was making more money, on this side of my business, for less work and less hassle! So a win, win situation!
A lower number of clients require less work and also less administration and therefore less staff to deal with the underlying process. The impact of this is that you make more money from the product or service line itself and the business has lower overheads, leading to yet more increases in profits.
If you decide to do something like this in your business, and especially in the present economic climate, be careful and think it through very carefully. In my business I had a few service lines so this helped to spread the risk. I don’t think I would have done this to all my services at once, as this would quite clearly be too risky. So if your business has more than one product or service line, and you want to try something like this, I suggest that you try it with one product or service at a time.
Also, if you do try this out, make sure that you are giving a very good customer service and that the product or service you are selling is an excellent product or service. I would also add that where there is high competition in the market you serve then this is less likely to work and would present a higher risk.
As noted above, once you have trimmed your business and made it more efficient and profitable, you can then look at attracting more clients and growing it by attracting more clients of the type you want.