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Small Business Focus: The Key to Drive Profits

In a former career, I analyzed hundreds of small business acquisition opportunities through the lens of a private equity investor. If there's one thing I learned from that experience, it's that the firms with the highest valuations, biggest profits and greatest levels of customer and employee satisfaction all share one trait. That is, they have focus. Successful small businesses focus on market segments where they can be most efficient. They also avoid opportunities that are outside that sweet spot. This focus translates into shorter sales cycles, lower fulfillment costs/timelines and stickier customers. 

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Focus is critical for a business of any size. We can each name a large business that lost its way by trying to be all things to all people. But most small businesses never get big because they take any business they can win.

Consider your current focus for a moment. If we were to study the revenue you generated over the past twelve months and segment it by service type what would we see? Let’s use the example of a law practice. A law firm might practice in the following legal areas: corporate, estate, family and real estate. Now let’s pose a few questions about these offerings:

  • How much does each practice area contribute to the firm’s revenue?
  • How is that contribution trending over the past year?
  • How do margins compare across these practice areas?
  • What is the profit by partner for each practice? Is each partner pulling his/her weight?
  • How does the cost to acquire a customer vary by type of law?

If you can imagine a similar line of questioning for the various market niches your firm serves, you will start to see how this type of information would influence where you focus your team’s efforts. Successful firms routinely ask these questions and adapt their focus accordingly. That never-ending Q&A helps on many fronts. Here are a few:

More revenue

Wouldn’t it be easier to quantify the return on investment for a service offering if you were to frame that story around a single line of service rather than trying to craft it around a range of services (and customers) with little in common? It’s also easier to develop sales tools from that focused data. In turn, it’s easier to train a sales person to persuasively use those tools. Focus even helps your brand pop since your firm will be associated with something specific and compelling.

More efficient fulfillment

Thinking carefully about how your fulfillment of customer engagements varies by segment can also have enormous impact. Maybe a law firm’s support staff can most readily be cross-trained on family and estate law whereas more specialized (and expensive) resources are required in other areas. Labor cost savings can add up quickly with the efficiencies gained from focusing on services you can deliver most efficiently.

Higher profits

Not all service offerings are created equal. Nor are all customers. Cost drivers vary by line of business, as do customers’ willingness to pay. These variations can lead to large swings in profit as you look across your service mix and customer base. Understanding which offerings and which customers are most profitable should influence which service offerings you market and where you look for that next client. And - perhaps more importantly – those insights influence which offerings you don’t push and which engagements you choose not to pursue.

Visibility into your service mix and supporting finances can be game-changing. Equipped with that knowledge, you naturally start to think about how you would like to evolve your focus to drive profits. With that desired future state in mind, you can chart a path to incrementally get there.  What questions should you ask about your business to reveal your small business focus?

HOW TO develop your Focus

At Driven Insights, our bookkeepers and controllers are charged with much more than simply “doing the books”—we take the time to understand your unique business challenges and provide financial information that will support educated decision-making. With a full understanding of your objectives - and the small business focus you’d like to promote - we help identify the metrics you should watch and produce useful reports and dashboards, month after month.

Together, we will transform your business. Let’s talk about how Driven Insights can provide forward-looking information to help you build for the future. Contact us at info@driveninsights.com or 888-631-1124.


Dave Robinson

Written by Dave Robinson

Driven Insights founder, writes about informing business decisions and building enterprise value through financial management.

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