Great Advice from Ed Chan from Wize Mentoring - move from an unscalable “brain surgery business” to a highly scalable “nursing or pharmacy business” - where customers can still feel the personal touch - true for financial planners and mortgage brokers as well
Hi Ivan,
We’ve received some varying feedback from one of our recent Friday tip emails called "Increasing your prices" so here’s a follow-up email about this topic.
In this email, I explained the difference between a Business versus a Practice and the concepts of "value-based pricing".
To further delve into this topic, let’s break down the 3 types :
The one that makes the most money is the"Nursing or Pharmacy type" because of its ability to scale. Staff are easier to find as it’s not "highly skilled" and clients are willing to pay more for personal service.
In the Nursing/Pharmacy type business, you increase your income by increasing the size of the business versus increasing the size of the fee as in a Practice.
It’s the difference between buying your Medication at the supermarket (no service and low prices) or paying more for your medication from a Pharmacy where you can get advice and personal service.
Or after an operation, you need Nursing services and the patient is willing to pay more for the personal attention, and often the costs are paid for through private health insurance
The Tax Compliance business falls into the "Nursing/Pharmacy type" client because it’s highly scalable and the government drives the business to us since it's illegal not to lodge an annual tax return.
It relies on running the Business efficiently but one has the opportunity to turn it into an investment that pays a passive income without your direct involvement (giving you more choices in life) as long as you have the systems and staff to do the work.
Systems and procedures and formal reporting lines are required.
There are enormous benefits to this:
Hope that makes sense.
We’ve received some varying feedback from one of our recent Friday tip emails called "Increasing your prices" so here’s a follow-up email about this topic.
In this email, I explained the difference between a Business versus a Practice and the concepts of "value-based pricing".
To further delve into this topic, let’s break down the 3 types :
- "Brain Surgery" type Practice where the owner does the majority of work himself/herself and his/her income is limited to the hours in the day (not scalable) often to earn more, they work very long hours and a slave/prisoner to their Practice, unable to take time off because without him/she doing the work, the work doesn’t get done and his/her income ceases.
An Ordinary model that relies on Extraordinary people who are hard to find and difficult to scale. Often "burnout" is a common complaint. Owner dependent
To earn more money he/she needs to increase their rates and justify it by calling it "Value Pricing". Suited to unique service offerings. Only has a P&L Return and no Balance Sheet/Goodwill value
- "Nursing or Pharmacy" type business provides a very personal service but anyone can do it as long as they are trained to give really good personal service. This business model relies on Ordinary people who are abundant to source.
Clients are willing to pay more for that personal touch. Highly scalable and not owner dependent. An Extraordinary model that relies on Ordinary people. Has both a Balance Sheet/Goodwill value and a P&L Returnsince it’s based on Systems and teams to deliver great services
- "Supermarket" is a volume business and it's very competitive and competes on price so margins are very low and need to be super-efficient.
In the Nursing/Pharmacy type business, you increase your income by increasing the size of the business versus increasing the size of the fee as in a Practice.
It’s the difference between buying your Medication at the supermarket (no service and low prices) or paying more for your medication from a Pharmacy where you can get advice and personal service.
Or after an operation, you need Nursing services and the patient is willing to pay more for the personal attention, and often the costs are paid for through private health insurance
The Tax Compliance business falls into the "Nursing/Pharmacy type" client because it’s highly scalable and the government drives the business to us since it's illegal not to lodge an annual tax return.
It relies on running the Business efficiently but one has the opportunity to turn it into an investment that pays a passive income without your direct involvement (giving you more choices in life) as long as you have the systems and staff to do the work.
Systems and procedures and formal reporting lines are required.
There are enormous benefits to this:
- Your income is not limited to the hours in the day. In fact, it's unlimited because its highly scalable
- You are no longer a prisoner of your practice and you have more choices in life.
- Tax Compliance is an annuity income stream since it's illegal not to lodge your tax returns. Annuity businesses have both a Balance Sheet/Goodwill value and a P&L return versus Brain Surgery Practices only have a P&L return and no Balance Sheet/Goodwill value
- If the Business is working hard then the owners do not have to. The harder the owner is working the less the Business is working. Businesses are working at optimum when the owners have zero charges on the clock and the staff is fully chargeable
- Potential to turn your business into an investment that works without you and pays an EBIT/ROI of 25%pa or more (after Owners wages).
Hope that makes sense.
Ed Chan (bio)
Founder / Chairman (WIZE Mentoring)
Founder / Non-Executive Chairman (Chan & Naylor)
w: www.wizementoring.com
Sydney l Melbourne l Dublin
