Profit before growth: three levers most service businesses can pull now
Before chasing more work, make the work you already do more profitable. Prices, margins and costs, in plain terms.
By Growth is exciting, but more jobs at thin margins mostly means more stress. For many established service businesses, the fastest improvement comes from making existing work more profitable. There are three levers worth looking at.
1. Review your prices properly
Many owners haven't reviewed prices in years, even as wages, fuel and materials have risen. Look at what competitors charge, what your best customers value and which jobs consistently run over.
A modest, well-explained increase to regular customers is often accepted with little fuss, especially when your service is reliable.
2. Fix the jobs that lose money
Go through the last three months of jobs and find the ones that ran over time, needed return visits or used more materials than quoted. Patterns usually jump out: a job type you underquote, a customer who always adds extras, a supplier whose prices crept up.
Change the quote, the process or the customer. Sometimes the best fix is politely saying no to work that never pays.
3. Trim costs that don't earn their keep
Review subscriptions, insurance, vehicle costs, phone plans and supplier accounts once a year. Small savings add up, and some software you're paying for may no longer be used.
Don't cut the things customers notice, like quality and reliability. Cut what they don't.
Then grow on a stronger base
Once the margins are right, growth becomes more valuable, because each new job adds real profit. It also makes the business more attractive if you ever decide to sell.
Your checklist
What to do next
- Compare your prices with the market
- List jobs that ran over in the last quarter
- Find the pattern behind loss-making work
- Review subscriptions and fixed costs
- Decide on one price change and one cost change
Example
A car wash owner reviewed his pricing after three years without a change and added a small increase to premium washes. At the same time he cancelled two unused software subscriptions. Monthly profit rose without any extra customers.
An illustrative example, not a real client or transaction.
Questions owners ask
Won't customers leave if I raise prices?+
Some might, but reliable service businesses often lose fewer customers than they fear. Explain the change clearly and give notice.
How often should I review prices?+
At least once a year, and whenever major costs change.
Should I cut staff to save costs?+
Be careful. Good people are usually what customers value most. Look elsewhere first.
Important
This article is general information only. It doesn't take your personal circumstances into account and isn't financial, legal, tax, employment or valuation advice. Velaro Group is a buyer of businesses. It isn't a business broker, licensed financial adviser, registered tax agent or law firm, and it doesn't act for sellers. Please get advice from your own accountant, solicitor or financial adviser before making any decision. Read the full disclaimer.
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