I have worked with hundreds of entrepreneurs helping them to shape their businesses into their vision. One problem that I frequently come across is the quality or I should say, the lack thereof of some 3rd party service providers e.g. bookkeeping, IT specialists, etc.
For the record, I’m all about outsourcing non-core or mission critical activities to individuals who specialize in a given area. But time and again I find that many of these providers never consider the best interests of their clients.
Most of my entrepreneurial ventures have been as a service provider and one of my key mandates was to always be searching for ways to reduce our costs to our clients. That may sound treasonous, but in fact it helped to grow our profits and our roster of clients, most of whom were divisions of global packaged goods companies.
“Clients are always looking for cost reductions…suppliers are always looking to increase their billings”
The premise was simple. Clients are always looking for cost reductions on the goods and services they buy, so my thought was to pre-empt that thinking. Without boring you with the details, we provided telemarketing and communication services to the packaged goods industry, servicing their small or orphaned accounts.
Our normal program recommendation was to execute 3-4 telemarketing sales programs a year. The targeted accounts would range between 3,000-5,000 retailers. By the end of the second program we had accumulated sufficient information to go back to the client looking to adjust our original agreement-downwards!
Of course, this is not the norm. Most suppliers always look for ways to increase their billings by recommending the program be expanded. Our approach on the other hand, was very disarming to clients but was based on solid business premises.
Our typical recommendation after the second wave, was to reduce the number of calls by around 20%. Because at this point we usually had enough data to determine which accounts simply weren’t interested, for whatever reason, in dealing with us. We were in effect, wasting our clients money and therefore they should be culled from the program.
- So, what did this approach do for us? It positioned us as a trusted partner and an organization that had our clients best interest at heart.
- It dramatically increased our sales ratio performance e.g. a 35% sales ratio automatically jumped to over 40%.
- Our revenue per call would also soar. Clients always like that.
- Our profit margin jumped significantly as we kept a percentage of the savings. The clients never questioned us as we passed on about 80% of the savings.
- More often than not, clients would reallocate the savings to another program for us to execute. So, we really didn’t lose anything.
- Our efficiency increased as we were able to service more clients, at higher margins, without increasing our manpower or physical space. All while growing our revenues.
- Our clients regularly referred us to other divisions within their organizations.
The best part of this strategy was that we rarely had to justify our fees. Not many service organizations have that luxury.
“When I uncover these duplication, clients begin to lose faith”
Unfortunately, in working with my clients today, I find that many of the service providers they use, never look to help them. They simply focus on maintaining the status quo to protect their billings that often results in the duplication of efforts. When I uncover these duplications and bring this to my clients attention, they quickly begin to lose faith in these individuals.
These service providers think that by helping the client be more efficient or show them a better way, that they will put themselves out of job. Nothing could be farther from truth. It would in fact solidify their position in the eyes of their clients.
To be fair, clients are not innocent in this by any means. I’ve talked about this in The Small Business Minute #56 Delegate not Abdicate. Too many entrepreneurs eagerly outsource tasks that they don’t like doing or have no knowledge and then immediately ignore it assuming they no longer have to worry about that area of the business.
There are many great individual service providers that are engaged in their clients’ business. They do provide valuable assistance and insight but there are just as many that don’t.
If your service providers are not helping you run your business and don’t regularly suggest improvements, it’s probably time for you to demand more.
I’m Greg Weatherdon and this has been your Small Business Minute.