I recently got turned onto an older but no-less-important book by an ex-Harvard professor…
The book? Managing the Professional Service Firm, by David Maister.
I know, I know.
The title is a total snooze.
But I’ll tell you what: I’m only a couple chapters in so far, and if you’re serious about growing a service business, I promise you this is a must-read. Drop everything and buy it now.
(As I write this, there are 134 used paperbacks available through Amazon, starting at $1.06 plus shipping — I’m not recommending it for the fat affiliate commissions — it’d be worth it at 100X the price and then some, and that’s why I’m recommending.)
The hat tip goes to Matt Johnson from the Pursuing Results podcast service for recommending this. He’s a direct marketer through-and-through, a fellow Nebraskan, and the producer of one of my favorite new podcasts, Legends and Losers.
Anyways — all these hat-tips threaten to derail my main message.
Revealed: The 3 types of service businesses!
This comes from author David Maister’s deep work and consultation with service businesses of all sizes, across a wide spectrum of industries.
It applies equally to: law firms, accounting practices, consultancies, engineering and architecture firms, advertising and marketing agencies, and executive search services — as well as all kinds of other service businesses.
How is it so broadly relevant?
For a reason that’s a familiar refrain for regular Breakthrough Marketing Secrets readers…
Because it’s based on the underlying, enduring, and universal principles…
Not on some superficial trends or tactical distinctions that come and go with the season’s hot fashions.
What are the 3 types of service businesses?
And, importantly how do you maximize profits in each?
The types:
— The “Expert” Business
— The “Experience” Business
— The “Efficiency” Business
Let’s dive into each, and we’ll make sure to cover that whole profitability promise as well…
The “Expert” Business — based on your BRAINS…
For reference, think about an A-list copywriter. A top copywriter — young or old — understands how to get response. Even better, they understand how to get response in a specific market, around a specific topic. So if you want a financial direct response promotion written, for example, you’ll hire a top financial copywriter. They get paid a premium fee for their premium expertise, and will often get paid a performance kicker as well.
There’s an upside and a downside to this kind of business.
The upside is that you can make almost unlimited margins, selling the expertise of one or a small group of experts at a high premium based on exclusivity… And make even more money when you include performance compensation like royalties.
The downside? Expertise is hard to come by. It requires a bunch of brain power. The pool of potential experts is hard to come by — scaling a team is difficult. And there’s usually very little of the heavy-lifting part of this work that can be delegated to junior staff.
Usually expert-type service businesses are small boutique shops, specializing in completing a small volume of high-value projects. Their work is one-off and customized to the client and project.
The secret to maximizing profits in this kind of business is to maximize your expertise at getting a financially-valuable result for clients, and get paid high fees and performance compensation based on those results.
Any additional staffing beyond the expert-level partners in the business is primarily to support the experts spending as much time as possible in their unique abilities.
The “Experience” Business — based on your GREY HAIR…
This immediately makes me think of Direct Mail guru Dick Benson. The world’s largest direct mailers had Benson on retainer, paying him a couple thousand bucks a month, just so they had the phone number to his desk line. They’d call up, ask a question, he’d answer, and then he’d hang up. No chit-chat, not warm fuzzies. But he’d been there, done that, and could give you a best practice answer or initial test to run for almost any direct mail selling situation.
An experience-based business has the advantage of solving common problems, with a more-or-less stable set of decision-making criteria. The more data they’ve collected and decision-making criteria they have identified, the more valuable their services become.
In short, the faster and easier they can answer “been there, done that” questions, the more value they can provide.
While much of the initial value-creation is based on expertise and brains, a good experience-based business can make the value delivery scalable and repeatable through systems and processes.
This means that once the systems are in place, an experience-based business can become much more scalable. Either technology or lower-level employees can be used, at least in part, to convey the collective experience of the business. Clients will pay retainers and project-based fees to have access to the experience.
The way that you can maximize profits when you’re building an experience-based business is to identify as many repeatable and scalable systems and processes as possible — and get to work making them repeatable and scalable, without direct input on the part of the partners or high-level experts in the company.
The “Efficiency” Business — based on your PROCEDURES…
It’s clear when I think about Matt’s Pursuing Results podcast service, this is exactly where he aimed with that business. While there are X-factors that can be brought to producing a podcast, the technical aspects of publishing a show are largely based in repeatable processes and procedures. So much so, that Matt’s business has a “Production Systems” page on his site, that lists the critical elements such as Audio Editing, Promotional Graphic, Episode Video Version, Show Notes, Quote Graphics, Highlight Videos, and Promotional Emails. Given a process and a check list, even a junior-level employee can execute these tasks at a minimum-viable level.
An efficiency-based service business thrives with the kind of E-Myth, franchise-prototype, process-heavy approach that allows you to maximize the number of junior employees that are actually delivering the service.
This usually requires getting really good at one process or procedure, and perfecting it to the level that you provide a high-quality, mass-market service at a competitive price.
There’s no bespoke or one-off processes here. You define your service offering based on what the market wants, systematize it, and offer it in a take-it-or-leave-it fashion that leaves little room for customization.
When you do this right, it creates an incredibly-scalable service business run mostly by middle-managers and junior staff, with only creative vision and systems-creation left for the experts and partners in the business.
And that’s exactly how you maximize profits: by creating systems and processes that are so easy to implement that most of the value delivery can happen with even the most inexperienced staff doing the majority of the work.
The question: what model is right for you?
The maximum leverage and long-term profits are most likely at the efficiency end of the spectrum. That’s because you can create a massive operation on the back of a few repeatable processes, and build it in such a way that you do roughly the same amount of work — as the owner — with 10 or 10,000 employees.
The maximum freedom and creative fulfillment is likely found at the expert end of the spectrum. Choosing what you do from day to day, who you work with, and the terms on which you work is most possible when you’re a one-off expert with market demands for your unique talent. That said, there’s little leverage in this, because it’s a business built around YOU.
In most markets, there’s a movement through the spectrum as well. In a market’s early growth, it needs experts because nothing is standardized yet and dynamic solutions are required. As the market matures, experience becomes more valuable, as problems are less unique and solutions can often be based on best practices. And in the most mature markets, many tasks and solutions are so commonly recurring that there’s demand for efficiency of process, and those businesses thrive.
Today, if you want to become a top copywriter, that probably means you’re aiming for the expert end of the spectrum.
That said, I know people who have built substantial marketing agencies building simple lead-generation funnels for local businesses (or a similarly cookie cutter offering), using repeatable processes and procedures with most work being done by junior staff.
And, of course, there are opportunities in the middle, too. I currently work with one group led by two industry veterans. While they are both experts in their own right, what struck me most in starting to work with them was how much their experience played a key role in every service delivered. Because they’ve “been there, done that” for so many online and offline direct response campaigns, they have instant access to best practices on a scale few can rival (which also keeps them in-demand among A-list marketers). And for much of the day-to-day work, they’re able to tap junior staff.
Final thoughts…
Consider this: not every marketer or copywriter needs to join “The A-List.”
In fact, if you can get really good at one particular process and make it repeatable by others, you can avoid the A-list entirely, and still get rich.
Our ego may want to be seen as “The Expert.” But our wallet can be just as happy simply figuring out what to implement, and doing it over and over again, with little additional thought for each client served.
You simply have to figure out what’s most important to you, where that intersects with the value clients are looking for, and do that really well.
The above distinction is a good guide.
Yours for bigger breakthroughs,
Roy Furr
PS: One of the things I’ve tried to figure out with my BTMSinsiders training is how to make expert-level copywriting and marketing thinking as repeatable as possible. I think many of the programs I’ve created stand as a testament to that mission. The latest, released last Wednesday, is High-Velocity Copywriting Templates. This takes the three big idea types explored in High-Velocity Copywriting, and gives you a step-by-step process for constructing your sales message. It’s included at no additional cost as part of a BTMSinsiders membership. If you’re not yet a member, you’ll get instant streaming access when you join now at that link above.
