It occurred to me this morning as the barista poured my hot steaming soya milk, into my Americano, that she pours AWAY more than she pours IN. She explained that for the steaming process to work properly, you need to heat up a certain amount of milk,which produces a certain amount of waste. And because you can’t then allow it to go cold and reheat it again, you need to do it for each customer or batch of customers.
But here’s the key thing to note in this…. Starbucks know this AND…. I’m paying for the part the pour away.
A percentage of the £2.99 I pay, is for the part they throw down the sink.
If that wasn’t the case, they’d be pouring profits away every time, rather than just milk.
I Run An Accountancy Firm. So What?
It got me thinking… how many services are you providing where there is wastage:
- The calls to the client chasing them for information
- The calls to HMRC to resolve an issue
- The searching of a lost invoice (despite the fact that the client has Receipt Bank and has been shown how to use it 100 times)
And so my question is….. are you charging for this inevitable wastage or are you pouring away profits.
Because I guarantee, if you’re pouring away profits, you’re also getting really frustrated with the client for the time and resources you’re wasting. But spoiler alert… it’s not their fault, it’s yours.
You see, we need to…
- Identify where the waste is (the only reason to keep timesheets btw)
- Manage the expectations of the client so as to manage the waste
- Build in “scalable margins” into your pricing to account for the waste
How To Sort It
Off the top of my head (and you may have more ideas yourself) here are 9 ideas for how to limit the waste and make sure you’re being paid for it…
- Produce timesheets so you can see where the leakage is.
- Improve your processes to limit the leakage where possible.
- Build in variations into your pricing such as No. of transactions, annual revenue, quality of record keeping, amount of support, No. of phone calls, total length of calls etc. to make sure you’re getting paid for the work you do.
- Create added-value services where you WILL login to their email account, their Vodafone account, their Amazon account etc and track down all of their invoices for them (that’s the level of services I pay for.)
- Increase your prices to account for the waste. (You could always give a rebate if they were a model client which could be in the form of a “Model Client Discount” you give them next year or a “VIP Level” of service.)
- Explain to the client exactly what this means up front. Don’t hide it in your Letter of Engagement. Explain that this level of service assumes 3 phone calls a month lasting no longer than 15 minutes combined. And then explain what the next level of service gives them.
- Train the client to become a better client so as to limit the waste (hardly any firms ever do this and then wonder why they have terrible clients. I’d be terrible at driving my car if no-one had taught me, and you expect me to drive my finances?!?!?)
- Build in triggers into your processes that alert you when wastage is happening and have clear follow-up actions when the waste starts.
- Create online resources to direct clients to. Videos are best because they’re the next best thing to speaking to someone directly and you can rattle them out on your iPhone. Content is more important than quality.
At the end of the day, pouring profits down the sink, doesn’t just corrode your bottom line… it also corrodes relationships with clients, staff morale and your sleep.
Limit the wastage, accept that a certain amount of wastage comes with the territory and make sure you charge for it.