Whether it’s reluctance to charge for work outside of scope, failing to delegate, or not creating a business plan, some practices stumble when trying to grow profitably.
For practices trying to fix profit leaks, Heather Townsend and Jon Baker, the co-authors of The Go-to Expert, joined PracticeWEB in a webinar exploring how practices can reach their profit ambitions.
However, the need for practices to tighten any potential leaks was exposed early on in the webinar, as 55% of attendees admitted marketing plans lurked in their head, rather than written down or actively pursued. This statistic corresponds with Baker’s explanation that profit leak often comes from leadership issues or a lack of strategy.
Despite best intentions, founders often fall into bad habits. Outlining a case study, Townsend recounted how the owner of a practice she assisted didn’t manage their team well enough, and responded to rapid growth by making decisions in a rush. The practice's profit leak trickled down into other areas, such as their haphazard marketing model and basing pricing on undercutting rivals.
But simple tweaking of the practice’s pricing increased revenues by £40,000.
Fixing profit leak
Townsend and Baker highlighted the following techniques practice owners can enlist rather than firefighting or getting caught in the feast or famine cycle:
- Give yourself permission to take regular time out to reflect on business performance. Is what you have now fit for purpose and being adhered to?
- Seize the moment: Try to give a rough quote in a new business meeting, and get back quickly with a firm offer. “You will be amazed how much time you waste by those clients who say they’ll sign up and never do,” said Townsend
- Have a tight definition of the right type of client for your practice and focus your marketing at them. It’s far more profitable to go after a small section of the market place
- Price correctly based on your business model rather than anyone else’s. Some accountants look at their nearest competitors and base price on that price point. To improve cash flow, Baker recommended implementing a direct debit system. He recalled a a practice which struggled to sign clients to this payment method. However, when they were given the choice of raised fees or retain the same fee through direct debit, unsurprisingly, the practice increased direct debit clients
- Engage your team: “Performance management is not something you do when you have bad staff. It’s something you do across the year,” said Townsend. To ensure your team performs better all the time, focus on the "not quite bad enough" staff who usually slip through criticism. Have regular conversations with staff to ensure they know what you expect and make sure everyone in the business is working to the same standard
As for those 55% without a marketing strategy, PracticeWEB’s Alex Tucker presented a seven point marketing plan. Implementing a plan is important as it removes spontaneous decisions which ultimately leads to marketing not working:
- SWOT (strengths, weaknesses, opportunities, threats): What do you do really well?
- Goal setting: Set the direction of your practice
- Match goals to strength and opportunities: Assess your current capability to prevent over trading
- Create buyer persona(s): Who are your ideal clients?
- Write a two/three sentence practice message: What's your elevator pitch? What differentiates your practice?
- Schedule of activity: Where is your practice going and when?
- Measurement and review: Come back to this regularly, at least once a month
What techniques or strategies have you brought in to fix your profit leak? Have Townsend and Baker suggested any techniques which you plan on implementing?