After owning a service business for 22 years and teaching business owners to massively increase profit margins for the last 8 years, you could say I've learnt a few things very few people know, especially in a service business.

Let's look at the facts.

To increase profit margin (not turnover or sales) there are really only 4 main areas you can.

1. First of all are you measuring how many hours you are billing customers for, compared to how many hours worked? I've found dozens of businesses who don't invoice more than 80% of the work performed for customers, in other words their profit will be down 20% of what it should be.

You can find this out simply by measuring how many man hours all your team work in a week then see where each persons time was spend, on what job, with what customers. Then see if all were invoiced for all of the time spent with them.

2. Work out your actual hourly rate per person per hour. To do this look at your total turnover for the week and divide that by total number of hours man worked in the week. This will tell an important story.

Now compare the hourly rate with what your pay in wages per hour. Include taxes, superannuation and workers compensation insurance. Typically a rule of sum is that wages amounts to 28%-35% of the turnover of most businesses, so that means you hourly rate per person (from the turnover divided by total hours worked) needs to roughly 3 times more than the average paid to your employees.

In other words, if you make $60 per person per hour over the whole week in turnover, your wages should be less than $20 per hour paid, or preferably $17 per hour.

When you have measured the total turnover in a week and hourly rate earned per person for the week, start to look at where the profit really comes from by breaking this into different services offered and what turnover and hourly rate you make in each of those areas.

This is how to find hidden profit in a service business faster than anything you will ever see!

You will find areas where you make no profit at all and others where you make a huge profit, but you don't work many hours doing it.

3. Prices affect your profit dramatically. So if you want to increase your profit why not put them up. I have recommended nearly all businesses I have worked with one on one to do this, especially service businesses and 98% of the time absolutely no turnover is lost by customers not buying any more.

Prices always go up, so why not put them up by choice instead of necessity?

When you do you get an instant increase in net profit as there are no costs associated with it. Do you realize putting your prices up by 10% also increases your turnover by 10% instantly?

So why not try it? Maybe ever a 5% increase if you're worried. I have suggested this to thousands of small business owners in my seminars, yet few do it. The ones that do rave about the profit increase and how easy it was, after they got over the initial fear of doing it.

4. The 4th area to increase profits in a service business is to increase your conversion rate from inquiry to actual paying customer.

Measure it for a week and see how many quotes or inquiries turn into a paying customer anytime in the future. If you have a service business with a large average $ sale, measure your conversion rate over 1-3 months from initial inquiry.

When you increase conversion rate from better communication, which is so easy to do with professional training its not funny, you automatically increase profit margins. For example, if your conversion rate for a week was 20%, that actually means your sales person isn't productive for 80% of their week. 80% of their time is completely wasted, yet you are paying the wages for them for 100% of their time.

With training I've found I could help a business owner like this to increase their conversion rate from 20% to 30% or even 60%. Do you realise that an increase from 20% to 30% is an increase of 50%, which means your turnover increases by 50% as well!

So there you have it, how to increase the profits in your service business massively and easily, all without it costing you any money for marketing, not even a cent!

Tim Stokes has an amazing ability to increase the profits of a service business massively and very rapidly. He is considered one of the best business builders in the world by his results. Find out more about Tim by visiting his website at http://www.bbms.com.au (where you can see dozens of service business testimonials) or read his other extraordinary articles at http://ezinearticles.com/?expert=Tim_Stokes

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