3 Ways to Increase Profitability in Your Service Business

Service-based businesses often find it difficult to find ways of increasing profitability. While it's easy for retail businesses to mark up products, it's not quite as simple for service businesses to find ways of increasing their cashflow. But in fact, there are many ways to increase profitability for service-oriented businesses, but instead of overwhelming you with all of the possibilities, today I'll just give you just three ideas that you can implement into your business right away for a more profitable 2011.

1) Bundle services into value-based packages.
Service professionals frequently charge their clients using hourly rates. The biggest problem with billing your clients hourly is that many professionals seriously underestimate their value and charge too little for their services. And, service professionals often charge too little because they're afraid their clients will be shocked by the hourly rate if it's too high, and will take their business elsewhere.

To avoid "sticker shock" and still increase your rates, you can bundle services into packages and pull your rates away from the time-based model. Focus on the value you bring to the table and what you're actually going to do for your clients, instead of how much time you're giving them. There may still be a time component involved, but you really need to focus on the value, not the time.

2) Develop smart partnerships.
Small service-oriented businesses can develop partnerships to increase profitability. These partnerships can work in an unlimited number of ways. For example, a fitness trainer can partner with a local clothing boutique- something like this can work almost any way you want. The boutique can purchase discounted time with the trainer and hold a promotion where customers are given training sessions when they purchase a certain amount at the store, or the trainer can purchase gift cards and give them away as incentives for clients to purchase training session packages. Just about any business can develop these partnerships and both businesses benefit.

3) Hire employees.
One of the ways to increase your business income is to increase the number of hours you work, but that's not always appealing to business owners, who are often already overworked. Instead, hire employees or contractors to increase the number of working hours in your business without you having to work more hours. You'll have to train new members of your team, of course, but if your business is organized properly to start, you'll find that adding team members isn't nearly as complex as you may think. So, start by organizing your business and getting ready to hire by reading The E-Myth by Michael Gerber.

These are just three of the many ways that service businesses can increase profitability. The possibilities, however, are endless. It's certainly more about working more hours or raising your hourly rate. Look outside your industry and see what other people are doing so you can think about your business in a whole new way. The key is to be creative, and keep your eyes open for opportunities.