No, you’re not an idiot for starting a service-based business. If anyone tells you that, you can make one thing clear. They don’t understand you, they don’t understand your business, and they don’t get to tell you what business you should be spending your time on.
The biggest problem that people have with service businesses is that can’t scale. That’s what folks are going to tell you, if you’ve founded any kind of freelancing, consulting or client based business, they’ll say it can’t scale and therefore it’s a waste of your time.
I mean, to start with, that in itself is wrong. Not every business needs to scale to a massive degree, not every business needs to have world domination as their number one target at the expense of all else. But if scale is on your road map, it’s not an impossibility. It’s a challenge that you can meet head on.
This is for:
…and pretty much anyone else who offers services as their main business area. If that’s you, keep on going. This won’t be a long one, but I can guarantee you it’s going to be fucking useful, and if you think I’ve wasted my time you can email me and yell at me and I’ll take it. Ok?
First things first.
Why Do You Want To Scale
This is vitally important. This is what sets the tone. I’ve worked with agencies before who have struggled with this question, and most of the time it’s because they don’t actually want to scale at all. They think they should. They’ve been told they should. The money looks better at scale than it does when they’re small. But they don’t want it.
What they got into a service business for was to offer a service. They loved working closely and personally with their clients, and they loved having that small scale relationship. It was important to them, and it was everything they enjoyed about their business.
If you’re in that boat, stop reading. Don’t go into scale, because if it’s not what you want, you’re going to hate it and burn out. Trust me. I’ve been there.
Scale is only good for you if you want it. Scale is only good for you if you want to wake up and run a scaled — and continually scaling — business every damn day. Because hey, here’s the bad news. Once you start scaling, you don’t stop.
You stop and you die. You stop growing and you die. So if you start in on this path, be prepared to stick it out.
Scaling is like constantly running a race where the bastards at the other end keep on moving the goal post. The good news is, if you run a service based business, that’s how most of us feel most of the time. So you’ll be used to it and ready.
Here’s the 3 ways you’ll scale:
Turning your services into products.
Automating your services.
Reducing your technical work.
Those are the three avenues that every service based business can go down if they’re wanting to scale. You’ll notice there’s a bit of a pivot involved in all three paths. That pivot is what covers your move from servicing a set stable of limited clients to servicing an ever growing number — without constantly expanding your workforce alone.
If you only scale by hiring new technicians, you’re not actually scaling at all. You might be growing in terms of capacity, but all you’re basically doing is playing Santa Clause with an ever expanding team of reindeer dragging your ass and trying to get all the way around the world in one night when half of the people you’re dealing with don’t actually believe in you…
Turning Your Services Into Products
This is the best way for a service-based business to scale. Hands down, and if you’re really focussed on getting scale to happen, do this. It’ll put you in a much better position than the other 2 avenues. There’s a few ways to go about this…
Is there an in-house tool that your services are based on, and can you can convert to being a customer facing tool?
Is there way to create and build software that will replace your services, albeit in a more limited and less personalised way?
Can you turn your intellectual property into courses and educational products?
Any of these options can work well. Mailchimp and Basecamp both came from these options, and they’ve done incredible things. Basecamp, for example, turned their in-house project management tool into a product they could sell and eventually transitioned their whole business from web design into that product. They also released informational products like their books.
If you’re going to start selling tools and software, don’t get stuck selling consultingware — software that only really works if you have dozens of consultants setting it up, integrating it, managing data etc.
Automating Your Services
If you can find a way to offer a more limited version of what you do that allows you to almost completely automate the process, you can sell that service at scale.
If there’s automation running it rather than an army of technicians, that’s a scale situation. You’re going to be okay.
There’s a bunch of rules I have about automation though.
- Never automate shit that people will interact with unless you’ve made it clear that it’s automation. Sooner or later, that’s liable to end up embarrassing you in some way when your automation falls down and does the wrong thing.
- If you’re open with people about what’s automated — if it’s a chat bot for example — that’s forgivable. Otherwise, it might not be.
- Never automate anything that requires your voice. If something needs to come from you, sound like you, be you — then don’t automate it. This is a rule I keep for everything. I don’t automate stuff where it’s important that it has my actual tone, whether in text or anything else.
- Only automate on a sliding scale with your fees. If you have a client paying a few hundred bucks for a service, automate and scale. If they’re paying a few hundred grand, you get a human being onto that shit.
Reducing Your Technical Work
The higher level you work at, the less technical work is required, the more scale is possible without adding constant streams of people power. So if you can reduce your technical work by focussing on higher concept strategy and planning rather than execution, that’s going to help you scale.
It’s a matter of shifting your deliverables, and adjusting prices accordingly. If you’re a web design firm, you might want to shift to managing design language and brandtech, while having the work of design handled by your client’s in-house teams or by a company you partner with.
This is the toughest scale option, because while it allows you to achieve growth, you’re still sacrificing a lot of time and effort and energy on client work. That can be an absolute bastard.
No, You Can’t Ask For My Hourly Rate
Fuck my hourly rate.
Do you know the shortest way to drive yourself out of business? The fastest way to wipe yourself out? The easiest way to make your life harder than it needs to be?
Charge an hourly rate. If you’re a freelancer, a startup, an agency, a consultant, anyone trying to build a business based on their value, charging an hourly rate is only going to be an obstacle. It’s going to make it impossible to scale your business, as long as it’s based on hourly remuneration.
It’s not fair on anyone involved either. If you charge an hourly rate, it’s a lot better for you to drag the process out, over quote hours and get paid more. It’s a lot better for the client to have the shortest amount of time possible spent on the project while achieving the deliverables. That is going to leave you with a really shitty compromise.
Charge by the contract. Charge by results. Charge by set fees. Charge by monthly subscriptions. But don’t ever charge by the fucking hour.
Remember. People are humans. Not just numbers.
I don’t like automated phone calls. You know the kind, marketing calls or follow up calls or account management calls from companies who don’t give a fuck about me and want my money without wanting to provide human service. And when I get those calls, I realise that I’m throwing my money away.
People care about the small things. They care about being treated like a real person instead of just another number. They care about being treated as though they actually matter. Because when they pay for a service, to a company providing it their $10 or $20 or $50 a month may not seem like much.
But to the person earning that money, they know its value. They worked their asses off for that money, and when they choose to give it to someone, they want to know that the people they’re paying care about them as individual customers.
So when you scale your service-based business, you’ve got to keep people at the heart of it. And you’ve got to keep people as the focus of it. If you can’t, people will be able to tell. Sooner or later, they’ll leave. That means staff and customers.
…Focus On The Real Art Of The Deal
Let me put this to you. Winning isn’t about fucking people over. Winning isn’t about being the kid on the playground who beats up the little guys and is generally thought of as being kind of a little asshole. Winning isn’t about hurting, bruising, muscling, wrestling, manipulating, deceiving, insulting or controlling.
Winning a deal is about finding the best outcome for everyone involved.
The Art of the Deal, in my world, is simple. It’s where you understand what every party involved wants and you do your damnedest to ensure that the best outcome is reached. It means that when you go into a negotiation, your goal is not to get what’s worse for the other people, it’s to get what’s best for you, best for them, and best for your partnership.
When you’re scaling your business, don’t let an obsession with closing more deals and better deals distract you from what you’re about, from what your values are about, from what your mission actually is. Don’t let it turn your company into a soulless wasteland. Scale ain’t worth that.
[This post by Jon Westenberg first appeared on Medium and has been reproduced with permission.]