Do you offer a service or a process?

 

Do your figures add up?

Old chestnut

I have been involved in an on-line debate covering the old chestnut of price versus value. This is a very important issue in most service businesses and particularly for smaller businesses., because we all need to think what market we are in and what our business model is. I come from an accounting background, but I see the same issues and problems arising in many different service industries.

However, let us talk about accountants in particular, because it will illustrate the wrong-headed notions persisting in other sectors too.

Most accountants and others in allied areas who are in business for themselves trained in larger practices. Most of the remainder have worked in traditional practices. As many of you will know, the traditional method of billing clients was to charge them by the hour, much as lawyers have tended to do.

Somewhere along the line there has been a shift away from this, although some owners and partners in accountancy do not like change or stepping out of their comfort zone. The rest have generally realised that clients like certainty in their annual bills, so there has been a big move towards fixed fees. Unfortunately at that point further confusion has arisen as to the basis of charge.

Cheap, cheap

I think we should all agree that the basis of charge should reflect what the client receives in the way of service. Some accountancy firms have a model which provides only basic compliance for the clients, which for the uninitiated means that they get their accounts prepared and their tax returns done, but that is pretty much it. The clients have complied with the requirements of the law, and all necessary filings are made. They don’t get much in the way of advice, they don’t get a regular chat with their accountant and they don’t look for anything more. That suits some people and the annual cost is pretty low.

Value

However, many business owners want rather more. They want their hands held through the complexities of their bookkeeping and to understand how their accounts are drawn up. They don’t just want to know how much tax they have to pay and when it is due. They want to know whether there is anything they can do to reduce their tax burden, and whether there are any particular reliefs they might be eligible for if they make certain purchases or invest in energy saving equipment.

Clients who want these extras expect to pay more for the additional value. They still want certainty so they will be prepared to pay a higher fixed fee than some who only want basic compliance. Often they will get back the extra fees they pay in cost or tax reduction by being advised to do things a different way.

Getting lost

Somehow though, some very able accountancy firms get confused and lost in the fees jungle. They hear that Pursuit LLP does company accounts and tax returns for (plucking a figure out of the air) £400. They don’t know Pursuit’s business model, or whether they just offer basic compliance, though that is all you would get for that figure. They hear of another firm who charges £1,500 for accounts and a tax return and they think that disgraceful because they themselves “could do the job for a lot less”, by which they mean that there is theoretically a good profit above their overheads and staff costs at the fee they would charge.

What they don’t know is what the client paying more is actually receiving, and so begins the rush to the bottom; the attempt to match Pursuit’s very low fees and to compete on price without knowing what they are actually competing with.

In reality, they don’t understand what might be involved for a client paying a higher fee. Of course there might be a lot more work. Most likely though the client is getting a lot of attention, has access to the managers, partners or directors of the accounting firm and is receiving not only good tax advice to help manage their liabilities, but long term planning as well.

I have no problem with sensible models for accounting practices who offer basic compliance only. Indeed I have great admiration for those who are successful in the market of processing accounts an a low cost. After all, I like a bargain myself, and if I get food basics at low cost in a supermarket I am bound to be happy. “Pile high and sell cheap” is a proven strategy.

Common sense comparisons

However we have to be sensible in looking at what we get for our money, and when we are selling a service we have to know what we are selling against. There is no comparison between a mass-produced sliced white loaf akin to polystyrene ceiling tiles (remember those?) and the hot sesame-seeded split-tin from the local baker. You wouldn’t expect to pay the same low price for each of those, yet both have their place in the market.

If you provide a service you have to think what your preferred market is, and therefore who is your ideal customer. Then you can design an offering which will suit that type of customer.

I prefer clients who appreciate what I do beyond providing a process, and are willing to pay suitably. Such clients are far more appreciative, far more likely to recommend and refer you, and far more likely to remain loyal to your business than those who look only at price. Loyalty is a two way street of course, which is why we must continue to appreciate them as clients and maintain the value in what they get.

If someone in your sector appears to offer something at a very low price, look at their business model. If you rush to the bottom, your profit will too, and perhaps disappear. If you wish to operate at the bottom end of your market you must cut your costs and cut your customer’s coat according to her or his cloth.

The price of everything

As Oscar Wilde’s Lord Darlington said, “a cynic is a man who knows the price of everything and the value of nothing”. You do not want to be in the market for cynical clients of either sex without the right business model.

I prefer clients who value me as I value them, but we are all different. What market are you in and is it working for you?

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Forgetting why we work

Get off the treadmill...

It’s no secret that I believe in taking breaks from work because it helps me relax and be more efficient. Enjoying ourselves and having a bit of fun is good for us.

What I find really frightening is when I see people so buried in fighting their business issues that they end up working all hours, sometimes seven days a week. Often they are not making money, and that is when they seriously need help from someone like me. However, some people are making a lot of money, but they have lost sight of why they are doing it.

Making a pile of money is all very well, and of course business owners want to give their families a good life. Except of course they hardly ever see their families because they are always working.

One real downside of having their noses to the grindstone all the time is that these workaholics actually forget how to have fun at all. They neglect their outside activities, reduce their options to have holidays and race through their self-imposed tasks like slaves under the cosh. But they have enslaved themselves. I am not a doctor, but this seems to me like a recipe for driving themselves into an early grave through addiction to the work treadmill.

Of course I know some employees with the same addiction; some who really ought to have retired by now but think they are indispensable. Money really isn’t everything, except that their money pot means they could go and enjoy themselves in a useful manner. The trouble is, with all that work they too have forgotten how to enjoy themselves.

We work to make our lives better and to look after our loved ones, perhaps the better to help others, but also to have time for enjoyment and leisure. All of these things make us happier. I should hate to forget how to be happy.

Do you manage not to be busy all the time? Do you need help learning how not to be busy and how to make your business stop running your life? Call me if you need that help.

How do you manage your time to have some fun? What tips do you have?

 

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Working, resting, writing and walking

Floating boat by one of my favourite walks

The other day a doctor told me I shouldn’t work hard all the time and that I should take breaks and spontaneous time-outs. That is good advice, but actually I already do those things.

It is true that some of what I think of as a break, others might consider work, but leisure is whatever you find relaxing. I know many people and indeed some bloggers keep their noses to the grindstone eighteen hours a day. They are out seeing customers during the day and writing articles and blogs half the night. I certainly couldn’t do that and don’t have the drive or energy. I wouldn’t dare criticise in the sense that one might think that if you cannot make a decent business thrive in more normal hours you aren’t doing it right. Many of these dynamo-types are phenomenally successful. It’s just that we all have the choice as to whether we work all hours.

All of us need family time. Some of the “dynamos” schedule it in. I just like to let it happen. I don’t really watch all that much TV. What television I do watch I mostly like to be informative and instructive though I do like crime drama; most of it anyway. It’s time spent with my wife, though, and luckily she likes to watch much of the same stuff.

I write for enjoyment, even this blog. I hope you find it useful because that is part of the purpose of it of course, but writing gives me pleasure. I am very relaxed right now as I type this. :)

For me, another way of relaxing is in reading. I read about almost anything, and I do read fiction. I think that helps my writing style to keep fit. We learn all the time, and often one can see the tricks another writer uses to make the text lively and compelling so that we want more.

I am getting towards the end of the Millennium trilogy which, after the first part of The Girl with the Dragon Tattoo, is very gripping. The English writing isn’t great and the translation occasionally odd (why use “gallimaufry” instead of “hotchpotch” or “mishmash”?), but as we go on, the way of winding up the tension and making the reader champ at the bit is terrific. There is so much we can learn from other writers, famous or otherwise. I regard that sort of reading as gym training for writers. As in the gym, I might not be the greatest but I try.

As you know, I get the best ideas when I am out walking. Although I walk more in the evening I might go out any time of the day if my schedule allows and I feel like it. I am writing this in the afternoon having been out for a quiet walk this morning. I like to look and listen and today I saw oyster-catchers and both saw and heard a curlew. Relaxing like this makes it so much easier to come back to the office with new energy and ideas.

Some businesses in the service sector and even in my sector offer appointments to clients at weekends. I may occasionally see a client at a weekend in the UK tax season, but generally I think that if they can’t make time to see me during business hours or early evening they aren’t the sort of client I want. That is because if they are stingy over time they are probably stingy over paying me. But it suits me anyway to make sure I am not under pressure seeing people at all hours.

I find the best ways of working are:

  • to enjoy what you do
  • to take pleasure and treat as leisure what others might see as work
  • to be organised so that you are not under deadline pressure all the time so that
  • you can take time off when you feel like it, and
  • actually take the time out and have fun

Of course it’s whatever floats your boat, but that is what floats mine. What floats your boat?

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Business concessions and contracts

The fast food and general store concessions in the Myakka River State Park near Sarasota, Florida

I expect you have seen so-called concession businesses within big stores. They are businesses within other businesses and they sell specialist items such as costume jewellery, scarfs, ties or food. Those sorts of concessions are usually themselves owned by large companies, but small businesses can run concession enterprises as well.

Probably most small businesses who own concessions are in catering, but they may also run confectionery or sweet shops, sell souvenirs to tourists or other staples and essentials. It really is a question of what the particular environment requires.

The idea of having a concession is very attractive. For example you might run the cafe-restaurant in a golf club. Having a constant stream of captive customers would make any catering business owner excited. As always it is important to have a plan and a budget, and to fit your idea to the particular venue.

There will be questions you will want to ask yourself:

  • How much is the rent?
  • How many potential customers will there be? Is there other competition outside or inside the venue?
  • With the level of rent and any extra costs in the contract such as utilities plus my own costs, can I set my prices to be attractive and still make a good profit?
  • Is the length of the contract enough and do I get adequate compensation if it is terminated, for example due to redevelopment of part or all of the site?
  • Should my business rely entirely on the concession or should I have other irons in the fire?

The advantage to the site owner in offering concessions to outside businesses is that they don’t have to worry about being distracted from their own core businesses. A golf club is concerned with making the members comfortable and especially with ensuring that the course is maintained to a high standard. They care more about the state of the greens than about frying eggs for breakfast. However if you are frying those eggs it is up to you to ensure that they are perfect in the customer’s eyes or more especially their mouth.

Similarly, a main railway station’s managers care more about their infrastructure, the tracks and signals and moving the passengers through smoothly. A country park owner cares about the wildlife and the maintenance and does not need to worry about the selling of sodas, food and souvenirs unless there are complaints or litter and trash issues.

So if you are keen on running a concession, make sure your sums add up and the length of your lease is satisfactory. Decide whether you should have all your eggs in one basket. Maybe you should run several concessions in different places, or perhaps you shouldn’t just rely on concessions.

It ‘s all up to you, but as with any business, have a plan. Then go for it if it makes sense.

 

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We are on Alltop

Image representing Alltop as depicted in Crunc...

Image via CrunchBase

For those who don’t know, Alltop is an article and blog aggregator, bringing in content from news stations, newspapers, magazines, on-line articles and blogs. Alltop was founded by the great Guy Kawasaki. And now it includes On Our Bikes.

To get the best explanation of what Alltop is and what it can do for you, just let Alltop tell you.  Watch the video. You can see not only how it works from a user point of view, but how you can apply to have your own website listed and your feed included.

From the point of view of On Our Bikes, I hope the listing will stimulate a lot of traffic, and of course traffic means business either directly or indirectly through recommendation.

I feel very honoured and privileged that Alltop has included Bikes in the Small Business section. To be honest, I had almost forgotten about applying, and certainly had not expected to be listed, because I don’t suppose they have just anyone. Currently and understandably we are right at the bottom, but we are now wearing the badge with pride on the right of the blog.

I like Alltop. You don’t just have to scan through all the vast amount of feeds all the time. You can select your favourites for regular visits and browse and add new topics when you have the time.

Why don’t you try it if you haven’t already?

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Being cheapskate can cost you dear

Avoid the dabblers

It is a great temptation in business, especially for start-ups, to take the cheapest option when spending money on buying in services. It is very often dangerous to do this because some people just play at business.  Often the really cheap option will be a part-timer who does not depend on the part-time earnings to make a living.

A part-timer might be a dabbler; a student who likes building web pages but only when he is not out having a drink with his friends, or an employed “bookkeeper” who works on sales ledgers beyond her comprehension a couple of evenings a week. These people are unreliable because they don’t depend on the money you pay them, they may not be up to the job and they are easily distracted so will not give your work their best attention.

We all need to remember to see the value in services we buy in, know what we expect and how much added value to our business we will gain.

If you don’t know who to engage ask for recommendations from those who have bought the services you want. If they are not happy with their suppliers they will tell you so you will also find out who not to employ.

One of my clients ended up paying a fortune to have a good bookkeeper repair the mess left behind by the cheap part-timer. A friend had to get someone else to start again with his website when the dabbler disappeared back to Uni.

You can’t beat a great testimonial for your new service provider. Phone a friend if you are not sure.

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Delivering the goods

Delivering satisfaction (and fish and chips)

A lot of people who don’t have a business think that there isn’t a difference between a large one and a small one except in scale. But managing and running a small business is nothing like big business.

I have had difficulties dealing with large businesses such as the telecoms giants. If I didn’t know before, I know now that they don’t much care what an individual customer feels about them and very often they will treat the “small person” with contempt. After all, the fall-out and any losses incurred when an individual customer moves on leaves hardly a scratch when you have a big marketing budget and TV campaign and you can lure more people in with special cheap introductory offers. No need to mention the long and onerous contract and the twelve month notice period for anyone wanting to change.

Those of us running a small business know that our business is personal. We need to make sure that every customer or client is not only happy with our service, but absolutely delighted. That way we keep our customers and we get recommended. If something goes wrong in our process we must fix it immediately because we need all our good customers and they are our best marketing tool.

Telecoms companies and utilities can make all sorts of promises and can afford “wastage” of their customers who leave them because of their failures. We cannot afford to let people down because we would lose them and let ourselves down too. We must not make promises we can’t keep.

Don’t turn your back on me

Not suitable for a profile pic

Have you ever been networking and come across one of those little groups who are closed off? Maybe three or four people who are having their own meeting within a meeting and will be darned if they talk to anyone else? Of course anyone is entitled to choose their companions but it depends on the environment, because within a larger meeting they just look rude and arrogant. It sends all the wrong signals.

We can all get upset if we want to network and people turn their backs. However, the same thing happens on-line. I don’t mean that our on-line connections have to pay attention to all our tweets or react to everything we post on Google+. That’s not going to happen. It is just that some are so impersonal in social networks.

We are used to the broadcasters and relentless sellers. But what about profile pictures and avatars? I don’t want to see a logo. I want to see a face. So I was amazed when someone asked to connect whose profile photo is of the back of his neck. What message does it send? It is not even funny. It is worse and more insulting than looking at a business logo.

I like people I connect with to be open and to show enough of themselves that I can get the flavour of their personality. I cannot talk to or trust someone in a business sense if that person hides themselves, turns their back or sticks out their tongue. How do you feel when someone turns their back?

Why it is good to have a quiet time in business

A Spring walk next to the hornbeam wood.

We all like to be busy. I like to be busy. What is important for us is to be busy doing useful things, and not to be too busy that we are not thinking and planning.

Being busy is good for an active mind, but I have always found it valuable to give myself a break outside the work environment. I go to the gym quite a lot, but that also involves being busy and thinking what I am doing while I am doing it. It isn’t the sort of break from work I need for my mind.

I need to relax and let my mind relax. I recommend you try it. I go for a walk and listen to the birds, and try to pick them out and have a good look at them. I am lucky, or maybe it is by design that I live close to woods and open fields and not too far from the river. Sometimes I like just to sit quietly.

A quiet time with Gandhi in Tavistock Square

I have been trying to have quiet times during the day a long time before I set up my own businesses. When I worked in London I always walked in my lunch hour and after work. A decade or more ago I was able to spend time sitting quietly in the pleasant squares of Bloomsbury, close to where I worked.

In my quiet times I have most of my best ideas for improving and expanding my business, and for going in new directions. Many of my blog posts originate from observing when I am out or from just letting my mind drift. The more I relax, the fitter my mind is and the better I am when I get back to work.

Of course we are all different, but this works for me. Why don’t you try it? Do you like to get out for a breather in the fresh air?

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Paying the price for our services

Casting a shadow

We all know how important it is to have a contract with our customers and clients so that they and we understand what service we are going to provide. Having established what we are doing, part of that contract is specifying how we are going to be paid.

Sometimes we will specify that we will bill the client when we have done whatever we have agreed to do. Sometimes we will arrange to be paid in instalments, either because it will be a significant job or because it will help the client, or is convenient for a client who will need us year on year. Some businesses can ask to be paid up-front.

What we arrange in terms of being paid has to take account of our own needs. We need a proper cash flow to run an efficient business. We need to plan and therefore we need to have a reasonable expectation of when we will be paid, which we have agreed with each client or customer.

So what do we do when our client has not paid us within the agreed time frame? Firstly we shouldn’t do any more work or provide any more goods. Secondly we need to discuss with our client why we have not been paid. Of course occasionally something will have gone wrong with our service, but that should be something we already know. If the first complaint we have is after we ask why we have not been paid, it is very likely that the complaint is spurious and merely an excuse for non-payment. Of course we have to judge each case on its merits.

If the non-paying client is prepared to discuss why they have not paid, most likely because of cash flow difficulties, then depending on our own situation we could discuss easy payment terms. Sometimes clients will avoid taking our telephone calls, letting them go to voice-mail or using a member of staff to say they are not available. They will avoid our texts. They will ignore our letters.

If the non-payer ignores us then we need to take action quickly. It is no good sitting around waiting to be paid. The threat of not being paid casts a shadow over our own business.

We need to threaten court action and be prepared to follow it up. The process is not difficult, nor is it expensive. If we upset the customer, remember that we were unlikely to get any more business out of them anyway, and who wants a bad payer as a customer?

We cannot afford to be squeamish over collecting due payment for valuable work or supplies. We have to manage our debtors. Bad payers and silent non-payers should not be allowed to ruin our business. Do talk to me if you need help in collecting what is due to you.