The 7 Deadly Service Business Sins to Avoid
We often hear people talk about strategies that product-based businesses can use to save or make more money, but what about the service businesses? Are there lessons they can learn to raise their revenue while lowering their stress level? The answer is a resounding YES and they are actually tied together. There are seven rules that no service business owners should break and I believe in them so much we’re going to get serious for a moment ... oh yes, we’re going to refer to them as sins. Try to steer clear of committing them, even if they’re oh so tempting, and learn to clearly identify when your client or business is heading in the direction of doing so. Your bottom line will thank you!
1. Failing to stack the deck in your favor by choosing clients with whom you do not have the potential to succeed.
Not even the best poker player can win with a bad hand of cards. Though times of economic uncertainty can tempt us to work with more or less anyone who can afford our rates and everyone loves the feeling of having someone want to hire them, think about long-term gain here. You must work with someone who you know you can succeed with. Not doing this will create more work for you (while you try in vain to create a result that will not be easy to attain) and can also lead to unhappy clients, the latter of which could make getting new business in the future more difficult.
2. Working without a legal contract.
Working without a contract is what I like to call “cruisin’ for a bruisin’.” It’s asking for stress, and as a business owner you have enough of that already. A contract doesn’t just save you from future headaches; it helps you make sure that everyone involved in the upcoming transaction is on the same page. What should every contract include? Start with the musts: pricing and rates, your payment/invoicing plan as well as deadlines and timelines. Then perhaps add on some contract “bells and whistles” including: your policy on revisions and kill fees, how you will solve any disagreements, and even a clause that notes how (and with whom) contact will be made.
3. Failing to outline and agree upon the parameters and scope of your work.
Managing expectations is key in the service industry and doing it correctly prevents any unexpected surprises and future business relationship woes and complaints. Too often, service providers will start jobs without defining their roles. That results in less productive work and more responsibilities for the service provider than they’re being compensated for. Not only do you need to clearly define what you are doing (in detail) but you also need to become a master at identifying and preventing “scope creep” the moment it starts.
4. Not identifying a clear hourly rate for your work & estimating how many hours that work will take.
Even if you do not reveal to the client your hourly rate for every portion of the project you’re working on, you need to internally identify your hourly rate (or different rates for different types of work) before giving any estimate or proposal. Without understanding how much time (and time is money) you’ll be spending on performing a service and how much that should truly cost, you could very well end up working at a rate that is dramatically less than is feasible for business survival when all is said and done.
5. Allowing a client to rush you through your systems, processes and operations.
Service business people tend to like to keep clients happy. Heck, that’s why many of you do what you do -- to improve people’s lives through your service. That said, you cannot let a client decide how and when work gets done. In order to ensure your business and project runs efficiently and the work is done effectively, you must take the reins and hold them. You are the expert and pro -- that is why they hired you. If you turn into a performer for your client instead of focusing on your performance of a service just to please them, the irony is that you’ll end up pleasing no one at the end of the project.
6. Working before payment (or partial payment) is received.
The value of a service diminishes the moment it is completed. Always define and be cautious about service business payments! Also define your payment schedule and if payment stops, your work should to! Remember, this isn’t personal, it’s business. Keep it that way where money is concerned.
7. Accepting a barter or product as payment.
You cannot pay rent with necklaces, or pies, or whatever else someone wants to pay you with! You also need legitimate financial information in terms of your revenue, payments and expenses should you be applying for loans and on your tax documents, and at this point in time you can’t list the jam you received as a barter for your life coaching on your loan forms. This will also save you from haggling over how many yoga classes are a fair trade for a meal at a restaurant!
