The Financial Fallacy of a Services Business

In my years in the PR agency business, it’s become clear that people within services businesses are seen as money-hungry sharks. Certainly some of the time, this is true. But, now that I run my own company I am enthralled by just how often I can hear in someone’s voice that they are sure I am out to get as much money from them as possible – or that I am concerned about how much money I will lose if we no longer work together. While I can completely understand the base reason behind this, I think there is a core financial fallacy at play when it comes to services businesses and the people who run them.

For example, if I owned a hardware company selling widgets, there is no question I would want to sell a lot of those bad boys in order to make my business a success. However, most people understand the risks, rewards and business needs associated with “selling more” of these widgets. If my supplier of widget components is out of stock and cannot get me enough, I risk pissing off customers who want more when I can’t make them. If my widget manufacturing team is overwhelmed by the workload and I cannot hire enough talented/experienced widget makers in time for future orders, having a backlog will only serve to frustrate my team and make me risk excellent but burnt out staff making a run for the door. If I know the people buying a certain widget don’t need as many as they think they need, and I sell them more widgets anyway, there is a strong chance I will alienate that buyer and never get their business again.

All of these real business concerns come into play for a widget maker – and, while people seem to ignore it, they are as much a concern for a service business owner, like me. For us, widgets are team time (any services firm that preaches they are not selling you time broken down by expertise level is full of it, follow on post to come on that later).

Just as the widget maker plans for a month/quarter/year – allocating resources, determining profit/loss targets, balancing supply and demand – so do the leaders of services businesses. If I don’t manage time and bandwidth closely, I will burn out the amazing people who work with me – leave a string of unhappy clients who feel like they got screwed – or both. Short term gain of a little more budget from a client is meaningless when you look at these bigger issues.

Which leads me to my next point: short term thinking is part and parcel with the assumption that services businesses are just sitting around waiting for you to send a little money our way. Calling me a few days before the end of the month and assuming we’ll have a team ready to jump in and get started a week later doesn’t work. Services businesses aren’t like gas stations, you can’t just pull up and fill the tank whenever you like. If I happen to have the resources and passion needed to help you, well, you are in luck. If not, you are left scrambling to find a company that has the time to do the job. And, when you are working last minute like that, you end up needing to work with whoever has a ton of time. That’s like taking a table at the only empty restaurant on the block when all the rest have lines out the door – the food’s gonna suck.

So why is it that a vast majority of customers make the assumption that we must be sitting around twiddling our thumbs, waiting for their business? And why do people who are making these decisions think they can flip the switch and we will spring to life like little PR bots who are otherwise dormant? And, how do we get them to stop?

~ by Julie Crabill on October 4, 2011.

2 Responses to “The Financial Fallacy of a Services Business”

  1. Great post, Julie. I think a lot of people only believe in the costs they can “see,” e.g. it has to be physical and tangible for them to recognize its monetary value. But often it’s the unseen costs, those intangible, fuzzy things we call services, that can have untold value. Relationship building, positioning, branding, strategic direction, can be invaluable to a company, and yet it is the purveyors of those types of services like PR that get the short end of the stick. We need to figure out a way (is it even possible?) to quantify the value of service-based professions.

    That leads me to my next point. I completely agree with you that short-term thinking and successful services based programs just don’t go together. We are not magicians. We can’t magically snap our fingers and create media tours, brand awareness or customer/developer adoption out of thin air. They take time and emotional savvy. You’re trying to work with a tricky variable – those widely different, brain-possessing beings we call people – and it’s not a math equation with a simple formula and a certain answer.

    • Totally agree, Marie. I’ve tried different ways to quantify this particular services business – the only way is to tie the success of work to actual business metrics for success (making money, selling things, etc.). The older I get the more I realize that there are enough people who “get it” to work with (and build a successful business around) and it’s better to just avoid the others entirely.

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