- July 12, 2019
- Posted by: admin
- Category: Accounting Advice, Consulting
The dream of starting and running a business is something that has probably ran across the minds of many people at least once throughout their lives. Taking the next step and going through with it is one of the most difficult steps on the path of being your own boss. Every entrepreneur has dreams of eventually making that $1 million annual sales notch in their belt, but what about $5 million or $10 million? What are the keys to success when it comes to scaling a business?
The short answer to this question is obviously hard work and solid execution, but there are variables controlled through that hard work that can lead to increased positive results. Scaling your business through branding and recurring revenue are the two most important variables that can help you scale your service business. Below, we will explore why it is important to build your brand and what recurring revenue can do to transform your business.
Branding can be extremely powerful in the service industry because in today’s economy the customer experience is a story that can be shared across multiple platforms like Google or Facebook. As business owners, you want to be able to align your company’s brand with your core values and what your customers needs are. There are many studies out there today that focus on what has been called “emotional branding”. Emotional branding can be defined as the practice of building a brand that appeals directly to a consumer’s emotional state, needs and aspirations. The connections between business and consumer from emotional branding has shown to lead to higher business performance and a competitive advantage over rivals (Akgun et al., 2013). For example, consistently providing a quick response in a critical moment for a customer can lead to building trust that your business is there for them. In turn, this will lead to that customer choosing to stay with your business regardless of pricing or small issues.
The brand of a company is much more than its logo, but a logo is a good place to start. Your brand will eventually be identified by what your logo represents. Potential customers will see your company’s logo and associate it with the level of customer service and quality that they have come to expect. Creating this brand identity has many benefits.
Brand loyalty is a major benefit that can help retain customers and help your business scale. As a business continues to scale, customer attrition continues to grow. In the lawn and pest industries, attrition on an annual basis averages around 18% or 1.5% per month and these rates can be mitigated when brand loyalty is created. Loyal customers are also more likely to promote your business to friends and family. I think it is safe to say that customer referrals acquired through word of mouth are the best and cheapest way to grow a business. The benefits of being able to link your brand to your consumers will help scale your business past the $1 million-dollar mark.
Company Branding: Define your Offering
It is easy for an entrepreneur to say, “yes we do that” when someone comes asking for a job to be done. As I have mentioned, scaling a business through brand building is a great way to beat the competition and stand out with your own unique identity. Whether you have been in business for 25 years or are just starting out, defining what your brand is and what you offer can help accelerate growth. First, I would like to provide a quick example of just how important branding can be and how it relates to what your business offers. Back in 2018, IHOP, who has long been famous for their pancakes, decided to temporarily change their name to IHOB and be recognized for their burgers. While their burgers may be good, they are known for their pancakes and should not try to be known for something so different. They quickly reverted back to IHOP because their strength is pancakes.
The reason why I feel that example with IHOP is so critical is that as I consult with my clients, I find that many of them do not define their specialties and build their business around their strengths. I find it’s my clients that keep their offerings simple, and don’t do everything, that are the most successful. Whatever you find to be your strength, focus on that because it will lead to better value proposition and more happier customers.
Recurring vs. Non-Recurring
As you start to build brand awareness and scale your service business, one of the most important aspects to keep in mind is creating a recurring model. Typically, bronze, silver and gold plans are the foundation of creating recurring revenue. A bronze package is usually the bare essentials to what will be a successful outcome and a happy client whereas the gold plan usually consists of a few more premium services added in. The silver package is usually pushed by sales staff and typically returns the highest dollar/hour. I would suggest that as you create these packages, you give them a unique identity that is represented by your brand.
There are many benefits to creating recurring package-based revenue within your business. First, it relates back to defining your offering. It provides a structure to employees and lets them know exactly what you offer so that when selling to customers they are only selling services that play to the business’s strengths. Second, coupled with a strong customer payment policy that I discussed in my last article, recurring revenue creates predictable cash flows and creates a “snowball” effect that allows your business to scale. Lastly, a recurring revenue model creates enterprise value. Valuations of service-based business, particularly pest control, have skyrocketed over the past few years. Top valued businesses typically have 75% or more of their revenue derived from recurring services.
Aligning your company’s brand with your core values will help create an identity. It is important to incorporate these values into branding your services because your services will directly link to your customer’s experience. Providing excellent customer service, offering guaranteed satisfaction, and quick responses are all integral in the development of a brand. Building off your strengths, defining your brand, and creating a recurring model will help your business scale.
If you are starting a pest or lawn care business or looking to change your existing one, PCO Bookkeepers and Turf Books can help you achieve your goals. We specialize in the pest and lawn care industries and work with leading business owners.