Date: September 2, 2020
One of my clients came to me when she was grossing about 250k per year in her digital marketing firm and as she continued growing she noticed that her profits were declining and could not figure out why, or how to fix it.
We started job-costing (AKA unit economics) for her so she could clearly see and understand what each client was ‘costing’ her (employee time, subscriptions, and overhead costs). Instantly she realized that she was actually incurring a LOSS for some of her clients, while also seeing that her retainer arrangements were nearly double the profit percentage compared to her web projects.
Immediately she fired the costly clients and restructured her project-based clients into ongoing retainers and in under just 14 months, she went from an average 8% profit to 28%!! Not to mention the extra time that firing the unprofitable clients freed up for higher-paying (higher-profit) clients which helped to bring her from 250k per year to 1M – she literally quadrupled in revenue AND tripled her profit in a little over a year.
Now, she is ¾ toward her 2M/year goal and her profit margin is consistently over 25% (more than double the industry average)!
If you don’t already know – having paying customers isn’t free, if you’re not paying attention and tracking your costs by customer/job you could wind up PAYING CLIENTS to work with you! That is NOT good for business. Your pricing should accurately reflect those ‘costs’ and you should be keeping your ‘finger on the pulse’ on an ongoing, monthly basis. Otherwise, it’s very easy for clients to go over scope, eat into your profits, and become cash suckers.
If your business isn’t paying you as much as you’d like, if you don’t have enough resources to hire, or you’re just not sure how to price profitably – we’d be honored to help.