I answer the phone. It's one of my biggest clients asking if I'd like to increase my fees by 10 per cent as their business is doing really well and that they can afford to pay more. This will bring them back in line with what they were paying in 2008. "That would be wonderful, thank you"…. And then I hear an alarm ringing. It's time to wake up. It was just a dream.
That phone call is unlikely to happen any time soon. So what should you do to ensure we sleep better this year and next, knowing we are improving our profitability and prices?
Many businesses are experiencing growth and increased optimism during 2014. However some are also recognising that they made decisions during the recession – usually for very good reasons - which they now need to change or resolve. So how should we take brave decisions? What steps should we take to ensure we are in a better shape to ride the upturn over the next 12 months?
One company I'm familiar with, like many businesses, found the recession very tough. They dropped their prices, took on low-quality clients and over-serviced accounts at unprofitable price levels. As a result, they have found that they are now trapped in transactional 'buyer-supplier' relationships based on 'doing' rather than 'peer to peer' relationships based on being trusted advisers, delivering massive value through their expertise.
But how should they now increase their prices? How should they tackle dysfunctional client relationships? How should they tackle scope creep and over-servicing which can cost a fortune?
Hoping things will improve is not a solution. Hope is not a strategy. You have to take responsibility for improving your pricing and profitability. There is no Tooth-Fairy or Father Christmas. It's down to YOU.
Start by reviewing your client base. Which are you most profitable clients and potentially most profitable? Which are the least profitable? How can you improve the situation or replace them with more profitable business? Develop a strategy for each type of client.
Review your client relationships. Which are with senior decision makers and which are with juniors? How do those relationships need to be improved? The best client relationships are with senior decision makers who have authority, budget approval and can see the bigger business picture.
Review your pricing. If you haven't increased your prices for several years, now might be the time to change that. Price is the number one factor to improve profitability. If you don't get your price right you will be on the back-foot. I appreciate it is not as simple as just increasing your price. In my workshops we practice how to have grown-up conversations with clients about price. Rehearse your conversations. Do it when you are feeling confident such as just after winning some new business.
Review your people. Who are your stars? I predict that during the next 12 months there will be a war for talent. As optimism and confidence returns to business so recruitment will pick up. Think hard how you will retain your stars. Simply throwing money at them will not be the answer. Understand their aspirations and ambitions. Show how they will have a great future with you. Identify your less productive people. How can they be more effective? Either manage them better or manage them out of the business.
Review your products and services. Are they best in class? Do they need an upgrade? Are they looking tired? How are your best competitors developing their products and services? How can you be ahead of the market? How well differentiated are they? If your products and services look like your competitors' then they will be commoditised and bought on price predominantly. Are you delivering real value for your clients which makes a real impact on their business? Try to become mission critical to your clients.
Develop your vision for the future. How will your business develop over the next 3-5 years? How can you 'future proof' it? How will your market change, customers change, competitors change? How will you balance growth in turnover versus growth in profit? Where do you want to be in the future?
Now put yourself in your customer or client's shoes. What are they thinking? How will they view you and your price increase? If they have been getting their own way beating down suppliers' prices they may want to continue with more of the same! Will they let you get back to pre-recession prices? Unlikely. Appreciate that it's so much easier to come down in price than to go up in price. Expect resistance from them.
Wake up to the opportunities of the upturn. Take a serious look at your business and decide how best to ride the wave of the upturn.