Sometimes, it is our reluctant task to tell a client that their business just isn’t profitable. While it’s always better to discover this earlier to help to identify pricing or cost issues, the realisation can come at any point along the business journey. Having worked with thousands of businesses over the years, it always surprises me when clients do not consider the basics of running a business, especially pricing and costs.
I had a client who ran a coach company that was struggling at the time and they told me this:
“I don’t seem to be making any money, I price to win the business and succeed, but never have any money in the bank”.
So I helped the client to calculate what a job was actually costing him, in fuel, time, parking fees, administration and vehicle wear and tear per mile, and he was shocked to see that he was losing money or, at best, just breaking even. Having reviewed his pricing and cost model he put his fees up and, although he lost around 10% of the lower priced jobs he had previosuly been doing, the next year started to turn a real profit with enough excess to invest in the future of his business.
When a client asks for help and guidance, we really focus on the nuts and bolts factors like costing, pricing and profit margins, as this is what usually ensures business survival. Clients are always shocked at how much their overheads and asset wear and tear cost them, especially business vehicles. However, with that knowledge we help them gain, they then have the confidence to know that they’re charging the right amount to make a profit when they price a job.