If your profit margins are thin, there is a real danger you are running a charity for your least valuable customers.
Low margin work is a silent killer. Most owners know it is there. Very few actually cut it out, believing that loss leaders are a necessary part of business.
You want to fix this? Stop overcomplicating. Here’s a suggestion how you can remove low margin work in five direct steps.
First, list every client and project. Write down the revenue, direct costs, and hours spent for each. Be brutally honest.
Next, rank them by profitability. The harsh truth is often eye opening. You will spot the bottom feeders immediately.
Now, ask yourself this. Would you take on this work today, knowing what you know? If the answer is no, highlight it.
Then, have the conversation. You will note I have deliberately not used the phrase “difficult conversation” because you have already established the work is not worth doing at current price and/or service levels.
Raise your price for low margin clients or reframe the work. If they say no, you both win. You save time for higher value opportunities and they find a better fit elsewhere.
Finally, redirect freed up resources into clients and services that actually move the needle. Profit is not a dirty word.
Stop rewarding mediocrity. Removing low margin work is not ruthless. It is essential for any business owner who wants to thrive.
So how do you decide what to cut from your business?