Build a PROFITABLE business

Does this title sound daft?

    Read the following true story then tell me…

    Although this is about a company providing medical services, the horror is nothing to do with what happens to the patients. It concerns a small company that provided:

    • A 24-hour turn around service of laboratory tests results to the private medical sector – Doctors and laboratories that didn’t have the necessary equipment to process the tests or staff qualified to “read” the results.
    • A similar service to the commercial sector, where it would provide a specialist nurse to perform the same test on employees at the workplace and return the samples to the service provider company which would then process and “read” the results and report back to the client company medical department on the findings, usually within seven working days.

    The straightforward lab work was the bread and butter business that kept the company going on a day-to-day-basis, whereas the onsite visits to ordinary companies that were prepared to look after their staff in this particular area were the icing on the cake.

    Over time, two laboratories came to provide the lion’s share of the bread and butter business and negotiated their rates for the service downwards again and again – this was despite the fact that the individual “reading” and reporting on the findings was a skilled task that took the same amount of time per sample, regardless of the rate charged. Several people, employees especially, pointed out to the owner that it was bad business practice to keep giving in on the rate per sample, but to no avail.

    Ultimately one of the laboratories was placing such demands on the service provider for increasingly high volumes at such a low rate that it was fairly easily able to potentially cripple it by withdrawing its custom. Faced with this the owner of the service provider sold its company, its staff and its client base, to that laboratory for a pittance and just walked away from the business.

    Don’t let this happen to your company!

    1. If the service you offer is based on the experience and expertise of your people, stick to your guns and charge a fair commercial rate. The chances are that any company prepared to undercut you will either be offering an inferior service or they won’t survive long – in either case you stand a good chance of winning your customer back in time.
    2. If you have already allowed one or two customers to take over 50% of your resources or more (in this case it was nearer 80%) at an unfavourable rate to your company, take immediate action:

      Go look for other valuable customers to spread the load. If necessary diversify your market or your offering. Once you’ve built your customer base back up at rates you’re happy with go to your two bullies and say that unfortunately you can no longer provide them with your service at their current rate. They’ll either find a cheaper service and that’s okay as you can now manage without their custom (and it will free up resources for you to keep busy with replacement customers) or they’ll pay you the going rate.

    I wish you a successful, profitable business!

    Don’t forget to add your comments – or perhaps you have a story you’d like to share…

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