The Web Design Business Kit Chapter 13 – Prepare For Expansion
In this chapter, we’ll start to discuss the logistics of expanding your business. We’ll discuss what it takes to move your business forward, and the all-important systems you’ll need to have in place in order to grow.
You’ll learn why your technical skills really don’t count for too much when it comes to building your business. Yes, you need them. However, you need to use them in a different way. You must start to get as much out of your skills and knowledge as possible. This is called leveraging, and in this chapter, we’ll get into detail about why leveraging is so important.
Do you know what you’re bad at? If you do, then you’re a mile ahead of your competitors!
I’ll show you that knowing what you are not good at can be a terrific business asset. You can’t do it all when you’re growing your business – and here, we’ll talk about why you shouldn’t want to do it all, either! We’ll also cover the two big secrets to laying the right foundation for your business. If you get these two aspects right, your business is almost guaranteed to be successful!
Every truly successful business has these two characteristics – find out what they are,
and why you need them.
Next, we’ll get specific.
As a bigger business, how will you charge? We’ll spend some time reviewing the various ways you might price your services. I have a pricing recommendation for you that’s obvious and effective … Yet probably only 1% of Web developers use it.
We’ll also cover cashflow management and debt collection, and provide tips on the easy management of your expenses. It’s certainly an action-packed chapter! Are you ready?
So, You Want To Be Big
It’s normal to want to grow your business from a one-man band to something bigger. Expanding your business is an admirable goal and a terrific achievement. In this chapter, we’ll talk about taking that next step in your business career, and starting to grow your business beyond that of a sole operator.
Limiting your business’s size can be an advantage when you start out. Being a lean, mean machine allows you to quickly shift your focus, react to market forces quickly and easily, and take advantage of competitors’ mistakes much faster.
Now, the fact that you’re good at Web design doesn’t mean you’re good at business. Running a business requires a whole different skillset. What will you need in order to expand? Let’s take a look.
You Need A Plan
To move from the realm of a sole operator into something bigger, you need to define exactly what it is you want to become. As we’ve already discussed, if you identify your objective and plan accordingly, you’ll have a much better chance of reaching your goal.
Set a concrete, achievable objective. Check it every day. Figure out how you’re going toachieve that objective. What do you have to do to get there? Now, start doing it!
You won’t be able to do it all. It’s important that you recognize that at the beginning.
To grow into a bigger business, you need to wear a lot of different hats. But you won’t be able to keep them all on at the same time. To grow your business beyond the one person setup you have now, you’ll need to develop new skills. Financial analysis, personnel management, marketing talents, legal skills, business management – they are all essential if you’re going to grow.
Don’t be alarmed if you lack certain skills. If managed properly, your own recognition that you lack certain skills can be a tremendous business asset. The damage I’ve seen done by sole operators who have tried to juggle all aspects of a business has been huge.
You Need A Leader
Because it’s your business, it’s almost inevitable that you will be the leader. The skills you require to lead a growing business might be different from the skills you use now.
You need to have a vision, not only to see how things fit together, but for the future of the business. You’ll need a vision of where your business will be one, five and ten years down the track.
Be the entrepreneur! Have the vision, personality, and energy to drive your business. Someone has to be the leader and make the tough decisions. That someone is you! The leader’s role is to identify where the business needs to be positioned in the future. On the other hand, the manager’s role is to point the business in the right direction, and get the business there. Having said that, the buck stops with the leader.
Probably the best example I can give is that of my own business. I’ve identified how best to grow the business in order to meet the needs of our major stakeholders.
I pass that direction on to the business manager. She basically rejigs, retools, and repositions the business to facilitate this. Unless the leader and the business manager are the same person, the leader won’t get involved in the day to day operations of the business.
My manager concentrates on having the business make a profit. My focus, as the leader, is about building value. These two goals need to be integrated so that the business direction keeps moving forward.
An important consideration here is that I, as the major stakeholder in our company, know more about the business, the expectations of the stakeholders and the needs of clients and staff, and have more information available to me, than anyone else. With this information, I’m in the best position to make judgments and decisions.
One such decision might be that we plan to open another office in the nearest capital city. I might develop a time frame of one year within which this needs to be achieved. This decision would be based on a range of information, such as a demographic analysis, statistics on business growth in the area, and countless other factors.
I would then meet with my manager and discuss the goal with her. Then, she would start to implement it. She might begin by setting up an answering service in the city with a local number. A newspaper advertising campaign might be next. This might be followed by the employment of a person from that city who has well-established contacts. Then, once a consistent flow of business is established, she might rent a small office for the new team member. Before you know it we’ll have offices in every major city!
The leader comes up with the vision. The manager implements it. Together, they create the business’s future.
You Need To Know Your Capabilities
What skills do you have, and what skills do you need in order to grow your business? You can’t do everything yourself. Some tasks really are better left to the experts…
Case 13.1. Recognizing That You Need An Expert
I’m a terrible Web designer. I know almost nothing about graphics. I know less about programming. If I suddenly decided I’d be the designer of our Websites, we would close up for good about three days later! Actually, I’m not that bad … I’m worse.
The fact that I know I’m a terrible designer is a huge asset. The fact that I know I can’t program is a huge asset. The fact that I know I’m hopeless at graphics editing is a huge asset.
When I want a site designed, I can have it designed far, far more cost-effectively if I outsource it. I get a better job, at a better price, and have the job finished more quickly. It’s the same with programming, and with graphic design.
Take bookkeeping. Really: take it away from me! I have no idea how to balance the books. I review the figures on an almost daily basis, and receive fairly detailed financial reports. However, I couldn’t do the accounting if you begged me to. I tried to learn. Oh, how I tried! Then finally, after about three months of trying, I saw the light. I was spending probably eight hours a week on the books. If I could spend that eight hours a week selling our services, I would be far, far ahead of the money I would save by doing the books myself.
Therefore, I employed someone to do our accounting. I now had an extra day (eight whole hours!) to sell our services. As you can imagine, an extra day’s work can generate a significant amount of income. I came out well on top!
The point of that story is this: you can’t do it all. More importantly, you shouldn’t want to do it all. If you do it all, your business can’t grow. It’s impossible.
The Importance Of Skills Analysis
What skills do you have, and what skills do you need, in order to grow? Perhaps, like me, you’ll need a book keeper to help build the business. I’ll talk about cashflow in more detail later, but you probably already know how critical it is to get cash in the door.
That means having someone to look after collecting the cheques, making the phone calls, and chasing that money. If you are not good at this, then find someone who is. That person will be worth his or her weight in gold!
Focus on your skills. Concentrate on working on your business rather than in it. When I first started out, working away in my back bedroom, I was in a catch-22 situation. I would go out and do what I did best, which was get clients. After a few networking opportunities, a couple of advertisements, and a bit of lead generation, I’d have a few prospects, and make the sales.
Once I had these clients, I’d sit down and get their work done. I’d work hard, burrowing away for long periods at a time. I’d finally surface, hand the client the finished project and then I’d be sitting around, without any more work. I’d then have to go out and find some more clients, and so the cycle would start again.
You can tell from that example that I need either someone to land the clients, or someone to do the work. It was logistically too difficult to do both, and sustain a regular cashflow.
Growing your business requires vastly different areas of expertise. What about suppliers? Have you built relationships with suppliers who will help you grow your business? Are they reliable? Do they come through in a crisis?
I think (and I could be wrong) that our outsourcing model is pretty good. We attract a new client who wants a Website. We have eight Web designers to whom we can farm the job. We select three that we feel, based on their previous work, would be best suited to the project, and we ask them to quote. They provide the quote, we select the winner, and they do the work. The job is completed to our satisfaction and payment is made (usually via wire transfer). All we really do is project manage the job, and ensure the best possible solution for our client.
Using that business model, one person from our business can manage at least six Websites a week. Let’s guesstimate that we make a measly $2,000 profit on each site. That’s a healthy income being generated by one person. Could you cope with developing six sites a week, along with all the associated meetings, updates, feedback and contacts?
Filling The Gaps
Are you good at writing letters, organizing meetings, and preparing for presentations? If not, hiring someone else to perform those functions could be the answer. You need to maximize your potential income. This is a key way to do it.
I’ve assessed my skills and, on paper, it looks like I shouldn’t be allowed anywhere near a Web development business. I have no formal qualifications in business, know very little about computers, and cannot design a thing. I’ve never programmed anything more complex than a microwave (actually, that’s a lie – I’ve never even done that! I was just blowing my own horn for dramatic effect), and I can’t book-keep to save myself.
Yet, I manage a successful business. Why? Because I’ve recognized what I need, in order to make a Web development business a success.
- I need Web designers. Got them.
- Programmers. Ditto.
- Graphic designers. Yes again.
- Administration staff. Have them.
- Office Manager. Done.
- Two other roles that we’ll come to in a moment. Got them!
The skills I have are limited to being half-decent at marketing!
- Set clear objectives to guide your business’s growth.
- Be a strong, entrepreneurial, visionary leader.
- Know your limitations, and get help where you need it.
- You can’t do it all – if you can and do, your business won’t grow.
Laying the Foundations
There are two foundations for growing your business, and only two. If you get these two aspects right, you’ll have a great business for life. It will be profitable, it will continually grow, and you will hardly have to lift a finger.
The two big secrets are these: Systems and people.
That’s it! Get those right, and you’re done. You’re a success. You’re a winner!
Having systems means you can work on your business, not in it. I know it’s a clichÃ©, but it’s a good clichÃ© because it’s true. Putting systems into place wherever you can will allow your business to run smoothly, with as little input from you as possible. That is vital.
As an example, let’s say I meet with a prospect to complete a comprehensive analysis of both his business, and the potential role of the Website in that business. From that analysis, we make our sales pitch.
Now, if I’m the only person in the company who knows how to do this, I’m limiting my business – I’ll be able to generate clients only from the prospects I see. We realized this early on, and developed a system for the complete process of dealing with prospects from the minute they contact us. Everything from the telephone script our team follows, to the follow up; from dressing for the meetings, to handling themselves at the meetings – it’s all just a system. The analysis is simply an extension of that – a systematic review that anyone in our business (or anyone at all, for that matter) can carry out.
System 1: The Needs Analysis
The questions we ask during our needs analysis are designed to extract as much relevant information as possible about the job, so that we can better establish a solution.
As the details of the needs analysis were covered in Chapter 5, I’m not going to repeat them here, except to say that any of our staff members can easily complete the process and ascertain important details about:
/#li#Why the clients want a Website.
- What they want to site to achieve.
- How the site will be used by the business.
- What the clients’ competitors are doing.
- What content and functionality the clients want their site to offer.
- The platforms and systems on which the site will function.
- How the site will be marketed and maintained.
- What the project budget is.
This analysis tends to achieve a couple of objectives. When we ask questions such as, "What are the objectives of the site?" and "How will you market the site?" it gently guides prospects to realize that the site goals need to be very clear, and that ongoing work will probably be required to market the site properly.
This process also qualifies the buyers. It alerts them to some things they might not have thought of, it lets them know that we’re experts, and it qualifies them, to a very large extent, as buyers of our services.
What this system does is ensure a consistent quality of analysis, regardless of who completes it. The team receives training in the Needs Analysis interview techniques, and in asking open-ended questions.
System 2: The Follow-Up
From that systematic analysis, we move on to the follow-through. Now, different people write letters differently, and it can be time consuming to write letters to prospects.
To assure the quality of communications as much as possible, our team uses a system of template letters. Aside from changing the name and date on the letter, there isn’t anything else to do!
A few minutes is all it takes: we produce high-quality follow-up letters, personalized for the client.
System 3: Compiling The Proposal
The proposal for the client can often take hours to complete. Over the years, we’ve repeatedly refined our proposal structure and process. It makes no sense, in terms of either quality control or ease of operation, to start each proposal we do from scratch.
A ten-hour proposal in thirty minutes! We use a system of templates to compile each proposal, which ensures that all prospects receive a great quality document that addresses their specific needs. The proposal goes through a simple system that addresses the key criteria of the vast majority of our prospects.
We also include areas in which the proposal can be personalized with whatever information needs to be expanded upon.
The proposal includes:
- an introduction about us
- an overview of the needs of the prospect
- the problems the prospect has
- Web development methodology – what’s important and why
- proposed site flow chart
- extra features list
- how the proposed site fixes the client’s problems
- testimonials and case study
- key recommendations
- costs (hosting, domain, software, etc.)
- frequently asked questions
- suggested next step
For a sample proposal, take a look at the file named Web Development Proposal on this
Depending on the client, we use varying amounts of graphics throughout the proposal. For some, we might present the proposal as a PowerPoint display. Other prospects’ presentations might be put onto CD (and in case you’re wondering, the most effective proposals for us are the ones printed on paper).
We know how to present the proposal because we ask prospects how they want it presented. Easy! And this tells them right from the start that we’re here to provide a simple and pain-free experience that meets their requirements.
Is our proposal system perfect? Of course not. Is our proposal system effective? As effective as any system we’ve tried so far. Is the proposal system finished? No. We’re constantly refining and editing it. How do we know it meets the prospects’ needs? We ask them! One businessman even told us it was the best proposal he’d ever seen!
System 4: Presenting The Proposal
The system for presenting the proposal to our prospects is also very simple.
First, we never mail the proposal out and simply wait for an answer. The preferred way (because you’ll make the most sales this way) is to be with the prospects when you present. Take them through the proposal step by step, answer any questions as you go, take care of the objections, educate them on the value of what you’re proposing, and then give them the quote.
Then ask for the job.
Regardless of their answer, the prospects receive a letter after the meeting to thank them for their time – the details contained in the letter obviously vary according to their response.
System 5: Client Maintenance
Finally, we have a system for maintaining the details of all prospects and clients, whereby we enter them into the database, and start a process of regular follow up. Because it represents a logical step-by-step progression, anyone can follow our system from the moment the prospects contact us. It requires no extraordinary skill or knowledge, just a basic understanding of Websites and usability.
Take a look at the Client Management Process file that’s included in this kit’s documentation. With a system like this, instead of having just one person who’s able to make a sale, literally everyone in
the company can win new business!
You can’t do everything. If you do everything, your business won’t grow. Systems are the answer!
I’ll talk about hiring in detail in Chapter 15, but here, we’ll discuss the staff- and supplierrelated issues that will affect your business’s success as you prepare for expansion: the qualities of your team members, your company culture, and productivity!
Identifying the qualities you require of your team members can be enormously difficult, but it’s also enormously important. Fitting the right person to the right job often means a longer commitment and a better relationship later on.
For instance, you might need a person for a simple role – such as an assistant whose job it is to remove staples from paper, deliver the mail and do the posting. The best person for this position will probably not be a university graduate with burning ambition. But, a semi-retired older person, who is looking for a few easy hours per week to work for a little extra money, might be perfect.
Quite often, the team members’ personal qualities will be much more important than their skills. You can teach skills. You can’t teach honesty and integrity. In Chapter 14, we’ll go into more detail on how you can find the right person for the job every time.
Now here’s an interesting topic. I always thought that “culture” was just another groovy term for atmosphere, but it’s not! As my company’s developed, I’ve seen that the culture is an integral part of the business.
Your culture is one thing you can have an impact on through just about everything you
do. From the moment you connect with the potential employee, whether it’s via a newspaper advertisement, a friend telling him or her about you, or a face-to-face meeting, you’re influencing the development of your business’s culture.
Your team will pick up on almost every signal you send about how they’re expected to act. From that, the culture of your business will develop. If you’re laid back and relaxed, then the staff will act that way, too. If you’re strict and insist on being called by your surname, then your business will probably be more formal.
The culture of your business will impact on your success (or failure) in ways you would never dream of.
Here’s a quick example. Our business culture is one that is very relaxed and laid back, but our team members are also very involved. They all know what the budgets are. They know what the profits are on every single job. They know what the rent is. Basically, they know just about everything about the business. The team is involved! They receive bonuses when we have a good month (the bonuses vary and might be cash, tickets to a show , or a massage).
This level of involvement – and accountability – impacts on our business in tremendous ways. All the staff members feel they’re a part of the team. They feel as if it’s their business, which creates a great sense of accountability. Our team is very aware of, and receptive to, everything that impacts on the business. They keep the costs as low as possible. When they’re out and about (even on their days off), they might see some office supplies and buy them with their own money if the item has a decent discount (I reimburse them, of course).
The team works furiously to get the job done in the quickest possible time. We’ve also had occasions when team members have come in to client meetings on what should be a day off, to ensure the client gets the best service at the right time. Why? Because of the culture we’ve developed.
Take a moment to think how you would like your business culture to develop, and then actively work to achieve that culture.
Ensuring the highest level of productivity within a Web development firm is certainly a challenge with which I’ve struggled. ow, as we know, to measure something, first we need something to measure. I tried measuring work output. However, with lots of our work being creative in nature and intangible), this proved almost impossible.
It’s difficult to compare the productivity of someone writing Website copy to that of someone project managing. The copywriter may well spend an hour on a single sentence the Project Manager would be tearing his hair out), while in that same time the Project Manager might have made six telephone calls, organized the production of three graphics, and met with a client.
I decided to try something else. I tried to define the number of work hours required for my team members to complete specific tasks, but found it to be too limiting.
Now, the way I view our productivity is by dividing our total net profit by the number of work hours required to generate that profit. I’ve found this method works best, though it still isn’t perfect.
The most important part of this productivity review is to have the staff know exactly how we’ll measure productivity. Having a fairly equitable and consistent process for the tracking and analysis of productivity enables every member of our team to look at the numbers and see if he or she has been working as productively as possible. Furthermore, because all members of the team are accountable for the hours they work and the income they generate, they appreciate the measurement.
However, ensuring maximum productivity is a separate issue. There are three main aspects that I’ve seen impact on our achieving maximum productivity.
If everyone in the office is happy, vibrant, and working hard, then new team members quickly assess this and generally behave the same way.
The fact that we provide measurement of productivity provides quite an incentive. The old saying, "What gets measured gets done" certainly rings true. Because our team members are accountable for the hours they work, the productivity remains high.
We provide our team members with a road map of where we want to be in the future, and why. As soon as we reach that destination, our team members receive a bonus. The team has done what we asked them to do – if we reward them, that same behavior will be repeated. We also reward our team for outstanding work on the way to the destination. Simple!
Valuing Your Business Partners
Don’t look upon suppliers as… well… suppliers. Look upon them as business partners. Because the obvious truth is that these people can be a big part of your business, and they, like your in-house staff members, will impact on your company’s culture and your productivity.
An example of one such partner is the Web host we use. We host a number of sites with them, and we receive exceptional care and service. We have a terrific rapport with one of their top people, and I’m sure that has an impact on the very smooth service we receive.
We certainly don’t look upon the hosting company as a supplier who we have to constantly beat down on price. They provide a terrific service and we consider them to be a very valuable part of the team. I’m more than happy to pay them the very reasonable price they ask.
Can we get a cheaper host? Yes.
Can we get a host with more features? Yes.
Can we get a better host for our business? No.
Our hosts are part of our plan for growth. They make hosting our sites easy and provide the highest quality service imaginable. We can grow with these great people!
If you deal with quality people, you’ll get quality results. Our programming
person is top quality, our host contact is top quality, our designers are top quality – so we achieve top quality results!
- Write a proposal once … and use it 100 times! Systematization is key to expansion.
- Put the right people in place, gather a great team around you, and you’ll reap the rewards.
- Work on your business, not in it. A clichÃ©, but a great clichÃ©!
First Steps To Being Big
Your challenge is to move your business to the next level. The first steps you take will be the most important!
One of the biggest steps is to recognize the importance of what you’re about to do. Now’s the time to step back and take a detailed look at your business.
It’s time to work on your business, rather than in it. This is what the big businesses do – it’s the reason why they’re big businesses! They have trained staff, they leverage every part of the business they can, and they outsource as much as possible – the three essential components of growth.
Here, we’ll see how you can leverage your marketing, leverage your training, and why you need to know exactly what you’re doing – and focus on it!
Learning To Leverage
People I know hear the word “leveraging” a lot. Probably because I say it a lot!
Leveraging is the difference between growing your business the way you want, and staying small despite your best efforts to expand. My definition of leveraging is simple:
Leveraging is doing something better so you get better results.
Here’s an example. Imagine you spend two hours putting together an advertisement for your local newspaper. You generate three leads from it.
Compare that with this scenario. You spend two hours putting together a media kit and approaching a major TV program to run a story. They do a feature on the Internet as the future of business. You are the expert they use in the piece. You generate 1,264 leads and retire the following year.
Now, that’s leveraging!
Marketing has enormous leveraging ability. It costs you the same amount as the next person to buy advertising space – but you can achieve vastly different returns on that investment. A friend of mine who’s a graphic designer ran a $155 newspaper advertisement for his services at the same time that we ran our $157 ad. He didn’t generate an inquiry. We landed a $20,000+ client.
If you can increase your conversion rate from one out of ten to two out of ten, you’ve doubled your business. That’s leveraging!
If you can take clients who have never referred you new prospects before, and have them start referring five clients each per year, then that’s leveraging.
Leveraging What You Have
Leverag ing isn’t just a matter of sourcing new business. It’s about using your systems and people to their full advantage.
Leveraging systems provides enormous advantages. The system of prospect care, analysis, and follow-up that we described before allows us to deal effectively with, say, ten clients to every one that we’d be able to serve if we didn’t use those systems.
Training also provides great leveraging power. If we spend a couple of hours on training, we can reap the benefits created by six highly skilled team members, who are far better able to generate business income than they were before training.
Three of our team members are attending a Women’s Networking breakfast this week. After that, each will attend one of three training sessions organized by the same group. The cost to my business will be wages for twenty-four hours, about $300 in fees, and the downtime associated with not having these four people in the office.
But the benefits we can leverage from the breakfast and training sessions are huge! We’ll have four representatives of the business at a networking function, mingling and meeting with our target market. They’ll all learn quite a bit and, because they’re all going to attend different training sessions, they’ll leverage the knowledge they gain as individuals and share it among the team.
We’ll almost certainly gain new business, we’ll be able to offer more services because the four who attend the training will have more skills, we’ll have a happier team, and the value of the business will increase because of all these factors. That’s leveraging!
Case 13.2. Leverage What Your Learn
We recently finished a Website for a client. As part of the job, we completed a huge amount of research on the client’s industry, and a lot of research specifically on Web usability within that industry’s target audience.
When we built the site, all that research was the focus of the development. We also created a database component from scratch that met the needs of the target market, and allowed the Website owner tremendous flexibility and control over the site.
The client’s previous site had made "almost no sales in the past few years." We uploaded the new site, and within twelve hours, the client had sold more of his product than he
had over the previous years!
Within just three days, his gross sales were more than the cost of the entire Website!
What we won’t do now is pat ourselves on the back and rest on our laurels. Instead, we’ll take all that fantastic intellectual property we’ve created, and which belongs to us, along with the database module, which is copyright to us, and market it furiously to as many prospects as we can. Instead of one sale, we’ll make ten or twelve using the same product, and with minimal additional work. Now, instead of taking days and days to develop the site, we can practically do the whole job in four hours.
What can you leverage? Leveraging will help you get the maximum out of your business. Leveraging is the key to growing your business with the same amount of work you do now. Leveraging is smart business!
Getting Others To Do The Work
Of course, having others doing the “work” is a great way to leverage your skills. If you can design a Website and make $50 an hour, that’s great. However, if you have ten people designing sites at $50 an hour, you’re making $500 an hour. Minus wages, you’re making $250 an hour.
That’s the essence of leveraging right there, and it’s the main reason why so many companies are keen to grow – to enjoy the benefits of leveraging employee hours. Let’s look at a smaller version of this strategy, a version I like to call "Getting others to do the work."
As I mentioned, if you sell your time by the hour, you’ll find it nearly impossible to grow your business. Why? Because there are only so many hours in a day. However, if you sell many other people’s time, and make a profit on every hour, then you can make lots more and grow much faster.
We have developed our systems and business model so that we do as little work as possible – and not just because we’re lazy! We know that we can be far more profitable if we subcontract the work out to skilled professionals. If we’re developing a site and have a Web designer, graphic designer, and programmer all working on it simultaneously, then it’s far easier for us to provide a better solution to the client, as well as capture a higher profit, than if we tried to do all these things ourselves.
While our subcontractors are working away on that site, we might be gaining another couple of clients, and preparing to get that work done. More clients equals more referrals. More clients equals more monthly contracts.
Never do something yourself that you can get someone else to do more cheaply. Never get your team to do something that you can get someone else to do more cheaply keeping in mind, of course, that the quality of work needs to be the same as if you did it in-house).
Focusing On Making Money
Most of my telephone calls are screened now. If someone rings me, I’ll generally call back later that day, when I make all my calls in a block of time set aside for that purpose. I don’t clean the office anymore. I don’t set up the boardroom for meetings anymore. I don’t type most letters I send. I don’t do the mailing or check the mailbox.
I do very little of the actual work in my business anymore.
As soon as my focus shifts from making sales and making money, the business income drops. It isn’t good business for me to spend an hour a day writing letters and doing the posting. In that hour I could make a $10,000 sale.
Your entire focus needs to center on how you’re going to get that next client and, specifically, how you’re going to make money. As soon as you stop doing that, your sales will drop.
My business has been a little busy over the past week and I haven’t been out and about much. As soon as I do get out and about, the work starts to come in. Next week, I’ll be attending a businesspersons’ charity lunch (on Monday), a golf day for local resort managers (on Thursday), and a media club lunch (on Friday).
At each of those outings, I expect to meet at least a couple of potential clients. From these prospects, I’d expect to generate some business. If my focus were staying in the office and checking that the work was being done, then very soon the business would come to a standstill.
That’s why our systems are so important – those systems make sure everything is done right. The systems we have in place are the biggest focus of our business manager. The systems mean that I don’t have to be around for the work to be done.
My focus is on the money. That’s my role. I’m also the one with the vision for the business, I have a big say in the marketing, and I do plenty more. Yet, my focus is entirely on the money – and that means making sales.
I was once involved in a start-up company that had received about $1 million in capital. The inventor of the product they sold was working in the office with an Administrative Assistant. I’d been contracted to provide marketing advice, and did so. The business never really took off and, upon visiting the office one day, I could see why.
A local nursery was delivering plants for the new office just as I called in. The business owner spent almost two hours placing the plants throughout the office. Two hours! I finished whatever I was doing in the office, and then had a meeting with the business owner.
As soon as we finished our meeting, the owner went off to sell one of his products to a housebound lady who couldn’t get into one of the 110 nationwide stores in which the product was sold, or purchase from the Website. The product had a profit margin of about $20. I later found out the customer lived 150 kilometers away and it was a four hour round-trip to visit her – all to sell a product that provided a gross profit of $20.
That’s not focus! Is your focus on making sales or are you caught up in the mundane day-to-day operations that could better be left to someone else – a person who could do them faster, better, and cheaper?
Focus on making money. Get those systems in place, and get the right team around
you. While you’re doing all that delegating and leveraging and training, remember: you have to focus on making the money, and have others do the work.
- Leveraging your time, your skills, your marketing, and your systems are the keys to business growth.
- Leverage training, intellectual property – and anything else you can!
- Delegate. Have others to do the work if they can do it better, faster, and/or cheaper.
- The leader must focus on making money. Nothing else!
For many, talking about money is as taboo as talking about sex. Now’s the time to overcome your squeamishness for financial matters! To expand, your business needs cash. You need to be expert at handling it.
First, let’s discuss cashflow. I’ll talk about the importance of getting the cash in as quickly as you possibly can, and how to follow the few simple steps of a collection procedure to increase your chances of being paid promptly.
Once you get the cash in, you need to keep as much of it as possible! We’ll talk here about managing your expenditures, and I’ll share my top five tips to minimize expenses and increase cashflow.
Cashflow, Expenses, And Minimizing Risk
People who aren’t in business don’t realize the importance of cashflow.
Cashflow is King.
You need cash. No ifs, no buts.
The secret to cashflow? Make sure your incoming cash covers the outgoing cash. If you can do that, the rest is easy! It sounds simple enough, but this is often more easily said than done.
Let’s start with getting the money in. What we do is charge every client a 50% deposit before we start work. There are no exceptions to this.
If we’re purchasing a product (e.g. software) on behalf of a client, we require the entire amount to be paid in advance. Again, no exceptions. We make these terms very clear to our clients, and we expect them to abide by them. After all, these terms are what they agreed to. We have never had clients even question the 50% deposit. They simply pay it, without any fuss or bother.
Generally, we use a simple payment scheme: a 50% deposit, and 50% on completion of the job. With our Web work, the terms are that the Website will not be uploaded until payment is received. If the job is a particularly large one, we’ll have clients agree initially that we are to receive payments as we move along the process to completion.
I’ve seen lots of different ways to get cash in. For instance, I have one client who, in her consulting business, requires 100% up-front before she commences work.
Think about what you’ll need cash-wise in order to run your business, and what will suit your business style. Then invoice – use the Invoice template provided in this kit’s documentation as a starting point.
OK, that covers what we need to know for the deposit. The balance can be somewhat harder.
Never, never, never upload your work unless payment has been received. By all means, show your clients that the work has been completed. There are no problems there.
However, if you upload the site, then send your invoice for payment, the clients have no reason to pay you. There is absolutely no urgency whatsoever for them. They’ve received what they haven’t even paid for, so they’ll take their time.
The worst thing that can happen here is this. Imagine the clients have the site up and running for a month, and still haven’t paid you. Because they didn’t contract your services for the Website’s marketing, they have had very few visitors to the site, and it isn’t meeting expectations. They may well think, "OK, this site isn’t performing. I’m not paying!"
As soon as your clients perceive a poor service, they will be even more reluctant to pay.
Don’t let that happen!
We’ll say you’ve completed the project, and you’ve sent off your invoice for the balance. Here’s the actual procedure our accounts department uses.
A Step-By-Step Collection Process
The team member who finishes the job notifies our Accounts department and gives them a letter to go with the invoice. The letter basically says, "Thanks for your business; here’s the invoice and don’t forget we offer other services."
Our Accounts department prints off the invoice, and sends it to the client with the covering letter and a Reply Paid envelope. All of our invoices are due in seven days.
On day eight, a reminder notice is sent to the clients, to remind them that our terms are seven days and request immediate payment. The note is accompanied by a letter that reads:
Hope all is well.
I am writing to you in regard to Invoice number (number) we sent you on (date).
We understand that payments can sometimes be overlooked, but we would appreciate your cheque as soon as possible, as the payment is now well beyond the due date.
Were there any concerns regarding the account or work involved? Please let us know if you have any questions or comments. We are always pleased to hear from you, and want to make sure that you’re happy with the services we provide.
Thanks (name). I look forward to hearing from you soon.
(Account Manager’s name)
PS: If, for some reason, you are unable to act now, we understand. But please do call me at (phone number) so we can find an agreeable solution.
Day 16. The client is telephoned with the following script:
"Hello Bob, it’s Jane from XYZ Design. How are you?
Bob, I’m following up on an unpaid account we sent out on (date). It’s (invoice number) for $(amount owing). First, I just want to make sure you’d received it?
OK, good. The invoice is now well outside our agreed trading terms. (Pause here)
Bob, I need an idea of when we can expect to receive payment.
OK then, Bob. I’ll write down that we will receive payment on or before (day and date). Terrific, Bob. Thanks for your time! Take care."
If the agreed date arrives and no payment has been made, we telephone again and gain a firm commitment to payment.
This script is much like the first, but ends with, "Thank you Bob. Now you have agreed to pay the invoice before (day and date). That is definite, Bob?" If the payment is not made on this day, then we send a letter that reads like this:
Hope all is well.
I am writing to you in regard to your outstanding account, Invoice number (number).
As you know, this payment is well outside the time you agreed to pay, and you have not made the payment as promised when we contacted you previously.
We are now very concerned regarding this payment and would like to have a chat about when we can expect the account to be settled.
Please do call me at (phone number) so we can find an agreeable solution.
If I don’t hear from you before Friday, I will give you a call. If we are unable to resolve this issue, we will seek additional advice on the most appropriate course of action available to us.
Thanks (name). I look forward to hearing from you soon.
(Account Manager’s name)
In all our years in business, we have only had two bad debts. One was eventually resolved; the other was a debt for the balance of a Website design. This client experienced significant financial difficulties before we completed the site. We commenced recovery for the work we had completed, but abandoned it after finding that the time, energy and fees required in pursuing the money would cost far more than the amount we were owed.
Aside from those two examples, the vast majority (99%) of our clients pay within fourteen days. The more successful we’ve become, the more assertive we have been in requesting payment.
When we first started off, it would be a case of not wanting to annoy the client and not wanting to look desperate. Now debt collection is a case of thinking, "We’ve done the work, and the clients agreed to pay us within seven days, so can they please pay us?"
/A Better Receivables System
Our receivables process is good, but it’s not perfect. What would I change if I could?
Well, I’d like to change a couple of things. First, I don’t like the 50% on completion policy. I find that if clients are struggling with their bills, then they’ll push the date of completion back further and further. Even if all you need is the client’s final signoff, he might take up to three months to get this back to you. It’s sneaky, but it does happen.
My business shouldn’t suffer because of this, but I haven’t quite figured out a palatable way to address this issue with clients.
The second issue is that I’d prefer to receive full payment up-front, before I start any work. A client first raised the idea of 100% up-front payment with me, and I’ve been thinking about it ever since. I might have to give that one some more thought!
Cash out isn’t half as much fun as cash in! But, like receivables, it helps to have a firm policy. Our policy is simple. Treat the payments we need to make the way we would like our payments to be treated. We pay bills when they’re due. That’s the policy.
We are a little flexible, and always pay local and smaller suppliers first. If it’s a small business and a one-man band, we generally ask for the invoice on the day that the job is completed, and our Accounts person drives around and provides the cheque (or pays via online banking).
My top five expense management tips? Here they are!
- Keep a close eye on your expenses.
Track them month by month. Compare your expenses as a percentage of sales. Each quarter, give a list of your biggest purchases to your administrative person, and have them identify where savings can be made.
For instance, the cartridge for our laser printer costs us $240 to buy direct from the business that sold us the printer. Our local office supplier store sells cartridges to us for $164. We use one a month – that’s a saving of over $900 a year alone!
- Pay for everything you can with a credit card.
It’s easy to do, makes for fantastic records keeping, involves minimal fees, and when you pay the balance off within the interest-free period, there’s no interest payable!
A major benefit of using a credit card to pay for anything and everything, is the tremendous protection it provides you. If you buy a product with your credit card and discover that it’s not up to scratch, and the company who sold it to you refuses to help, you’ll almost certainly find salvation with your credit card company.
Laws obviously vary from place to place, but credit card purchases are about as safe a purchase as you can make.
- Don’t rent equipment.
Many computer stores these days make more money by financing the equipment they sell than from actual product sales!
Don’t rent. Don’t finance. Buy. It’s a one-time charge. It may hurt at the time, but you own it, you don’t owe it. Those interest charges can be a killer!
- Don’t pay before you have to.
I was talking with a supermarket executive and asked him the important aspects involved in selling to a supermarket chain. Was it volume? Was it price? Was it quality? I was wrong on all 3.
One of the most important parts of the contracts a supermarket negotiates is the payment terms. If a supermarket can negotiate a ninety-day payment system, with discounts for earlier payment, they’ll be very happy. They sell the product and have your money for three months! That’s free money for three months! With the volumes a supermarket turns over, this can be a substantial amount.
Don’t pay your bills early. Pay them on time, but not early. You want your money to work for you, not someone else.
- Don’t be shy.
Ask for better terms from suppliers. Set up that gas station account. Do what you can to get the best possible terms for every account you have. When you set up accounts, ask questions: "Do I get a discount if I pay with cash?" "Do you offer a discount for early payment?"
You have to minimize the risk that your business might fail. Your business will fail if you haven’t got any money, so you must continually push to get the money in. If the completion of a job is two days away, push yourself so it’s two hours away. Go and see your client and say that you’ve finished the job, present the invoice, and ask for a check on the spot.
Organize overdrafts before you need them. Have credit cards before you need them. Minimize the potential of not getting the money in the door. If you don’t get the money in, you must have other resources set up to ensure that your business doesn’t
suffer because of it.
- Cashflow is King – get the cash in as quickly as possible.
- Minimize the risk of failure – get that cash in!
- Pay your bills on time, not early. Have your money working for you.
Growing your business isn’t any more difficult than managing a one person business.
Yet, it is different. In this chapter, we’ve identified the basics of growing your business the right way. We’ve talked about the need to do a business review and identify what skills you require for your business to grow.
Remember, it doesn’t matter that you can’t do everything. In fact, that’s almost a necessity!
- Identify what you need to grow.
- Get the team around you with the skills that you need – this includes employees and suppliers.
- Focus on what you do best.
Once you have the right people and the right systems in place, you can work on your business, not in it. That’s crucial. You don’t want to be doing everything, because your business can’t grow if you do.
Use the power that your people, systems, and knowledge provide to leverage your capacity to attract and complete more business. Leveraging provides you with the biggest opportunity for growth. You have examples now of how to leverage your business – implement those strategies for success.
And, with the practical examples provided, it’s a simple matter of developing your own systems and getting started. You need to focus on getting more business in. That is your focus for growth.
Now that we’ve discussed what to charge, and how to take care of your cashflow, you’re in a position to estimate the right price for your services and get the money in. Review the way you quote for your clients. You provide them with terrific value – price your services to reflect that value, not your time. It’s the only way to charge!
As you know, getting money in can be a challenge. Follow the simple steps we covered here, and you’ll find collections a breeze – starting tomorrow!
Now that you understand the basics of preparing for expansion, it’s time to start thinking big. In the next chapter, we look at the challenges involved in managing your business as it expands.
That’s it for these four chapters! If you’d like to try before you buy, simply /#nl#/http://www.sitepoint.com/books/freelance1/signoff.php/#nlt#/download all 4 sample chapters, plus free sample reference material now/#el#/! For more information on the complete Web Design Business Kit, click here.
The kit contains not only the 4 chapters above, but 14 more chapters that span the entire business lifecycle: from first steps in freelancing, and establishing and running your business, to expanding your business, and looking to the future.
The kit also includes Folder 2–Documents, a set of over 60 excellent template and sample documents. From sample proposals and marketing plans, to template letters and staff employmenbt agreements, these documents provide an invaluable resource. And they’re all included in easy-to-use Word format on the kit’s CD-ROM.
For more information, see the book page.