The one surefire way to increase your profits

Most of the time, I’m discussing ways to increase your revenues and profits that have to do with marketing. However, if you already have a stable of clients, then there is an often overlooked method for increasing profitability: Raise your rates.

I’m sure at least one person’s jaw just dropped out their in tax-land. “I can’t raise my rates,” I hear you say. “I’ll lose all my clients, nobody will pay higher rates in this economy,” you exclaim.

In reality, you couldn’t be more wrong.

First, when was the last time you DID raise your rates? If you never have, or it’s been more than a couple years, then you’re long overdue anyway.

Second, people will, and consistently DO, pay higher fees for the services they use. People understand that the cost of doing business goes up. Your cost of living goes up, your payroll increases. Inflation is part of economic growth (and the economy is growing, just slower).

Third, if you take a serious look at your client base, you will most likely find that two instances of the Pareto Principle are in effect at your firm. The Pareto Principle, also known as the 80/20 rule, states that roughly 80% of your results come from 20% of your efforts. What this means in your practice is that roughly 80% of your profits probably come from just 20% of your clients. Similarly, 80% of your headaches probably come from 20% or less of your clients.

It’s time to critically analyze where your revenues are coming from, on a client by client basis. It’s also time to look at your headache clients, the ones that piss you off the most, take advantage of you the most, etc. One of the effects of raising your rates is that these clients tend to be the ones that go away, not the ones that are your best clients.

The relationship you have with your best clients will weather a rate increase. In fact, it’s not uncommon for your best clients to tell you they’re surprised you haven’t raised rates sooner, given the level of service you provide them. Your bad clients, on the other hand, will take their headache elsewhere, which should be just fine by you, as these clients tend to consume more of your resources than they produce.

Bottom line: Analyze your clients down to the dollars they generate and the resources in your practice that they … Continue reading

Are you working in your practice, or on your practice?

Whether you are a solo practitioner or a partner in a large firm, you MUST understand the difference between between working IN your practice, and working ON your practice.

When you’re working IN your practice, you are yourself preparing tax returns…doing books…preparing financial statements…talking to Revenue Officers.

When you’re working ON your practice, you’re creating new revenue streams…getting more clients…increasing revenue opportunities with existing clients.

By understanding the difference between these two, something interesting happens: You begin to realize that certain things you do generate revenue, and other things don’t.

Now obviously, if you are a solo practitioner or part of a very small firm, you still have client work to perform. But, you also need to spend time working on revenue-generating activities. If you don’t, then you quickly find yourself in a situation where you are finishing up work for a large client, and then revenues drop off the cliff because you no new client coming in to replace the one you just finished up. I call this the boom & bust cycle of a practice, and breaking you out of that cycle is, in reality, the overarching focus of everything I’m trying to present to you in these articles.

If you are stuck at some income level, and you want to push past it, then you absolutely, positively must spend time working ON your practice. This means working uninterrupted on tasks that will specifically generate revenue. Let me repeat: Uninterrupted. Your time working on your business is the most important appointment on your calendar. It’s an appointment that you should literally pencil into your schedule, and not allow it to be interrupted by anything.

The income generating tasks that you perform during these dedicated time blocks, typically marketing and practice management tasks, are the items that directly impact your bottom line. During these time blocks, you need to focus exclusively on these tasks, and your staff, if you have one, needs to respect that time (after all, it’s where their paycheck comes from, too). Nothing should interrupt you during your dedicated practice building time. Short of the building being on fire or your family being in a car wreck, absolutely NOTHING should interrupt this time.

The most productive business builders set aside their most productive time in order to dedicate to their business building activities. For some people, this is the first hour or two of the day, before the rest of the … Continue reading