For many business owners and entrepreneurs saying No can be one of the toughest things to learn to do.
When you first get started in business, you are hustling to make ends meet and establish yourself in your field. When a client asks for you to do something, it is very easy to say yes even if you aren't the best at it or even know how to do it. When you are looking for ways to pay the rent, every customer is considered a good customer.
But as your business grows you start to realize that some customers simply aren't worth having. When you consider the cost they bring to the company and the turmoil they can create, you realize you would actually be better off without them. I think this comic of Dilbert and browsers demonstrates it pretty nicely.
Dilbert and his Pointy Haired Boss Discuss Incremental Value
<a href="http://dilbert.com/strips/comic/2010-07-06/" title="Dilbert.com"><img src="http://dilbert.com/dyn/str_strip/000000000/00000000/0000000/000000/90000/3000/900/93946/93946.strip.gif" border="0" alt="Dilbert.com" /></a>
It represents a concept called incremental value. The first customer has huge incremental value. Just like that first toolbar add on was pretty awesome and useful. It provided value to your surfing experience and made things more easily accomplished (at least that was the purpose of it anyway)
Until you reach break even, each client that generates positive cash flow to the business has incremental value. But what happens when we build our business focused on any customer being a good customer?
Eventually we reach the point where every customer may no longer provide incremental value. They can eventually have a hidden cost associated with them. The cost that most people don't recognize is called Opportunity Cost.
Now if you want to work 120 hours a week handling every single possible client, then you may have a much different view point on incremental value. Personally I much prefer a saner life work balance. Think of it as an Optimized Business Model. When you first start out, income is optimized so everyone looks good. As you reach certain stages in business you have to start making some tough decisions.
The first decision is to fire some customers. When you reach the limits in your business (from a time, systems, etc standpoint), you have to take a close look at your clients and see which ones are creating the biggest bottleneck without providing the same value.
For instance if you are a freelance writer. You have 10 clients who work with you on a regular basis. Your time is the largest constraint in your system. You have one client who requires an extraordinary amount of time in every project without paying an equivalent premium.
For your business to grow, you may need to consider firing the client. You can always raise his rates to compensate for the extra time. You can also put in systems to reduce the amount of time required to deal with them.
Understanding the limits of your business and taking steps to remove them is the only way to develop a business that provides you with your ultimate life.
It isn't something you focus on early on as you grow your business but is something you need to add to your yearly planning process.
Learn to trim focus on the products you offer that provide the biggest result. Just realize that it only applies to a system that has bottlenecked and is limiting your growth.
PS If you are interested in getting coaching on your small business, shoot me an email by using our Contact Us Form. We have reasonable rates and guaranteed results.
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