So, take a look at the key resources you listed, what do they cost?
What activities are the most expensive?
Concentrate on the key costs, the costs that you must cover in order to deliver your offer to your target market, and your products or services to your clients and customers.
Depending on how you have built your model, you may have built your business “lean” or “cost heavy.”
An online payroll service may be a software driven lean operation as far as payroll costs are concerned, but the software overhead may cause the model to have heavy costs until sufficient volume is reached and economies of scale are achieved.
It is easy for a practitioner to fall into a trap of thinking that cost is the driving force in the typical prospects mind, and develop a cost driven marketing strategy, but not having developed a cost driven back end.
A cost driven marketing model focuses on cutting costs at every turn.
Working from home until volume warrants an exodus to warehouse type facilities. Outsourcing back office services to lower cost offshore providers. Or, streamlining operations to eliminate any wasted motion or effort.
Alternatively, you could build your business model using value propositions. Rather than making cost cutting the main focus of the enterprise, you could be working to increase the perceived value of your practice offerings.
This could include gaining intimate knowledge of the particular industry you are targeting, providing customized and personalized service, or possibly generating custom services and products.
Of course, it’s not as simple as those two extremes. Your practice probably falls somewhere in between.
Meanwhile, you add to your tax knowledge and are able to provide advanced tax and financial planning services which fall into the value pricing model.
And then there are the actual costs to consider. Once you know how your key resources and activities fit together, you can easily calculate or estimate your fixed and variable costs.Once you know how your key resources and activities fit together, you can easily calculate or estimate your fixed and variable costs. Click To Tweet
Besides having to consider fixed and variable costs, the cost structure will take into account the economies of scale such as those that come along with an expanded client base.
They can also include the economies that come from the sheer size of your firm.
The savings per person in software or research libraries, for example. Or, possibly being able to spread marketing costs across a larger base.
Whatever your costs structure winds up being, it will be the result of the structure of your business model.
And once you have described your current or planned business model, you will have defined what your strategy is or will be.Whatever your costs structure winds up being, it will be the result of the structure of your business model Click To Tweet
Alternatively, once you are able to identify how your competitors business model is structured, you will be able to easily understand their strategy.
I’m including a simple budgeting worksheet that will give you some ideas as you start looking at your cost structure. It’s a simple Excel type worksheet, created in OpenOffice, with two goal setting models using two different goals. The first model is created from IRS industry statistics for SIC 8721. You’ll have to look up the new codes as they have recently changed to an NAICS coding system. The second model is created from my personal budgeting model.
Each of these models gives you a goal setting tool based on either a gross revenue goal, or a net income goal. You set either the gross revenue goal you want and see what your budget looks like, or your net income goal and see what your goals might be in that situation.
After you get a handle on your own practice model, you’ll want to create your own budgeting spreadsheet, based on your own revenue streams, resource costs, and target market penetration.
In your next lesson, we’ll have a capstone lesson on business models, then we’ll start talking about implementing your marketing tactics.
Join us here at Practice Builder Publishing and become a part of the community, whether you become a contributing author, a peer recruiter, or merely a raving devotee of the Practice Builder Publishing resources, I'll work with you personally so you can reach the goals you set.
Best to you and yours,
P.S. Think I'm full of B.S.? Maybe you ought to let me know what you think. Plop your comments in the section down below the related articles and let me know what you think.!
P.P.S. Got questions about products and services I talk about, the terms of service, privacy nd all that stuff related to Practice Builder Publishing? Click Here to read the fine print.
Share your experiences, and pick our brains.
Get GREAT Results - Fast!
I would love to see you become a part of the Practice Builder Publishing, and work with you personally to reach maximum profit potential this year! Nothing I teach or help you with damage your credibility. It will simply get you more clients and help you make more money.
If you stop searching for the next magic trick, the perfect software, the "shiny object" that's going to do all the work for you (note: it doesn't exist)- and just focus on building & serving your market - you'll actually start seeing GREAT results. FAST.
On the Practice Builder Publishing site, I teach everything I have learned over the years, and how you can use it effectively and efficiently. One of the coursesI teach is the "Absolute Beginners Guide To Starting And Building Your Own Accounting Practice When You Are Flat Broke" training course, and it's only $27.
To get started building your practice, and building it FAST, all you have to do is click this link below. Click the button below and order now!