Service Firms’ Success

Service Firms Success| vcfo

Keys to Success for Service Firms

Service firms are a vital part of every community. Most start with entrepreneurs providing a service for a small group of customers, performing that service increasingly well over time, and then experiencing growth as a result. But unfortunately, that growth also typically brings growing pains along with it.

With many service firms, owners at first feel rewarded by gains in customers and revenue, only later wondering why they’ve come to feel constantly stressed, drained, and certain that they not experiencing the same degree of profits or personal satisfaction they once did. Companies big and small, residential and commercial, all contend with virtually the same issues. They are very good at performing their core services, but not as good at tending to other aspects of running their business.

So, how can owners of service firms get a handle on their businesses and achieve the success they want?

First Things First – Lead with Labor

Most service firms wrestle with labor as a primary challenge. This is true across a wide group of service firms, including:

  • Plumbing
  • Construction companies
  • Electricians
  • Call centers
  • Landscaping
  • Commercial cleaners
  • Janitorial services
  • Maintenance
  • Roofers

In most cases, a service firm’s biggest expense and biggest issue are one in the same, labor. When growth really starts to gain steam, a tendency for many in this space is to over-hire. This reactive or panic hiring often leads to rushed onboarding, diminished work quality, insufficient supervision, and more. These issues, in turn, translate to higher labor costs, lower margins, and less satisfied customers.

Owners of service firms must understand every element of labor in their businesses. This includes understanding how hours are being tracked, being clear about expectations, setting each employee up for success, and supporting employees with the right ongoing supervision and guidance. In too many cases, employees or crews are largely left to their own devices and are not completely clear about what they’re supposed to be doing and how they’re supposed to be doing it.

To better understand the nature of labor in a business, the first thing vcfo does with many clients is to carry out a workplan analysis. Here, operations, systems, processes, and the experience and expertise required to carry out necessary activities are assessed, including interviewing employees regarding their roles and day-to-day activities. The outputs of a workplan analysis surface potential points of improvement such as process reengineering, staffing level changes, policy alignment, role adjustments, and more.

Know Your Role & Know Your Goal

It is frequently difficult to get service firm owners to take a step back from trying to manage every aspect of their business all at once. They are deeply involved working in the business and not pausing to work on the business. In the beginning, owners must be a jack-of-all-trades out of necessity. Over time, they must continuously reevaluate where their focus needs to be and that it ultimately can’t be on everything. As the business grows, so should its owner’s role with appropriate elevation and delegation of responsibilities

For example, owners should not be in the field managing individual projects when 50-60 people are working for them across a sizable area as individuals or as teams. Why? If the owner is doing project work, who is overseeing employees on other jobs?

For many, the goal of building a successful business is to achieve a satisfying work-life balance and live a comfortable life, not to see just how many hours they can physically work in any given period. Others may indeed be looking to push hard for a defined number of years so that they can then sell the business or get it to a point where others can oversee it without their constant involvement. Whatever the goal may be, identify it and work to gain a clear understanding of what it will take to achieve it.

Don’t Go it Alone

I’ll say it again. Owners must be careful to not fall into a trap of believing they can do almost everything themselves. However, that also doesn’t mean they need to hire a full-time CFO or senior human resources officer at the first sign of growing pains. A more practical and sensible approach for many is to leverage fractional HR support or a virtual CFO who can fill expertise and knowledge gaps, assess the soundness of operations, and surface risk areas. Fractional firms are also an option in other areas such as marketing.

As a service firm grows, labor doesn’t just become more unwieldy. It also becomes more complex, with a range of HR and compliance issues where missteps can get an owner into hot water or saddle them with unforeseen cost increases and even penalties for not adhering to growing compliance requirements. Growth brings financial complexities as well – from ensuring consistency in cost structures and project bids to understanding how one’s next phase of growth will need to be funded.

Service and Success

When owners and employees of service firms have a clear and aligned understanding of their respective roles and how well they are meeting their business and individual objectives, their potential for success increases significantly. In contrast, when small to mid-sized service firms fall behind and start to lose their grip on labor and back-office processes, they also start to lose money and put their business at risk.

Finding success as a service firm owner requires: 1) identifying your goal for the company, 2) outlining the plan to achieving that goal, 3) having a firm grasp of what is needed and securing the expertise to execute to the goal 3) understanding what is viable from a labor perspective, and 4) understanding where one’s personal focus needs to be and either adding expertise to the team in areas that aren’t a personal strength, or engaging outside expertise to help with other key areas of company performance, (e.g., finance, HR, marketing) to set the organization up for success.

Request A ConsultationNeed assistance with putting your services firm in a better position to succeed? Request a Free Consultation from a vcfo expert who can help. We are a service firm ourselves. Additionally, we’ve partnered with more than 5,000 businesses in our 26+ years and would love to share our expertise and experience with you.