Increasing Profitability

One of the best strategies to employ while seeking to increase profitability can be boiled down to something my dear ol’ dad always told me.  “Water your roses and pull the weeds.”  That is a nice way of saying you have to evaluate your client base, put those clients into various categories and take action.

Here’s how to get started on this concept:

1.  Get your client listing and financial report and assign each client to one of four categories.   If you have QuickBooks, the Job Profitability Summary report may be a good starting point.  These client categories can be described as

(a) Profitable Key Clients – those who closely match your service/product offerings and core competencies, who are also profitable to your company.

(b) Non-profitable Key Clients - as described above, but for some reason are not profitable.

(c) Profitable Non-key Clients – those clients who are profitable to your company, but what you are providing may not closely match your service/product offerings.  In other words, you probably provide something to them outside of your normal business activity because you know it is profitable.

(d) Non-profitable, Non-key Clients – face it, you might really like these folks but what you provide doesn’t match what your business offers, and darn it, you’re not making any income either.

Guess which client you need to focus on first?  If you guessed the client in group d, you are correct.  This group of clients should be referred to someone else.  There are reasons for this beyond just boosting your net income.  First of all, if they’re outside of your normal business activity AND you aren’t making an income, you’re not likely to provide them with the service that they really deserve.  It’s not fair to them and it’s not good for your business.

Here’s how to handle the situation.  Find a service or product provider more in line with what that client needs.  Make sure that provider is reliable and someone you would feel comfortable doing business with.  Then refer your client to that provider and do what you can to facilitate the transition.  Now you’ve done something nice for your (now ex) client.  You immediately increased your net profit by restructuring your client base.  You also helped someone else build their business by referring a good match for them.  Hopefully both parties will reciprocate and refer clients back to you.

From here, most of your energy should be focused on your clients in group a.  This is already working well, so you want to take good care of those ‘roses’.  Look at those clients in group b and find out why they aren’t profitable for you.  Make adjustments as needed to move them into group a.  What makes the group a clients profitable and not group b?  Once you’ve gotten that figured out, you are well positioned to get your group b folks into the “A-Game”.

Now for group c.  As long as this group of clients isn’t keeping you from servicing your other two groups, you can continue to serve this sector.  Ideally, you should review the group and see if you can adjust their services to more closely match your core offerings, but there are only so many hours in the day!

Why a Registered Agent is Important

You may have read recently that PepsiCo was handed a $1.26 Billion default judgment for failing to appear in court. The damages award was handed down on September 30th; PepsiCo said it didn’t even know about the lawsuit until October 6th.

How did that happen?  PepsiCo claims it first received a legal document related to the case from their North Carolina registered agent on September 15th.  On that day,  a copy of a co-defendant’s letter was forwarded to the Deputy General Counsel in PepsiCo’s law department.  The Counsel’s secretary set the letter aside because she was busy preparing for a board meeting.  Then, she forgot about the letter – oops!  On October 5, when she received a forwarded copy of the plaintiff’s motion for default judgment, she sent that document and the letter she had forgotten about to the legal assistant for Aquafina matters.  The next day the legal assistant sent the documents to a department attorney, who then called the registered agent to get a copy of the complaint.


Was the agent at fault for this little fiasco?  PepsiCo was at fault, not their agent, and there is something to be learned from this mess.  Here are some things you need to keep in mind regarding your registered agent.


1) To review: the Registered Agent is the business or individual designated to receive service of process when a business entity is a party in a legal action such as a lawsuit or summons.  The Resident Agent needs to be available in order to receive the legal papers being served on the company.  Most small business owners name themselves as the registered agent.  If you travel frequently or are difficult to contact, hire a professional service or ask your lawyer or accountant to be your registered agent.


2) The street address listed as your business address is the one on public record.  Anyone searching for an address to deliver papers will find that street address.  If you move, you normally have only 30 days to notify the proper authorities to change your address to your new location.

3) When you receive papers for your company, look at them immediately.  I have seen too many cases of people putting aside papers because they were either too busy or too scared to look at them.  Those papers generally have a deadline for responding.  In a lawsuit, you normally have 20 days to respond so you need to contact your attorney right away to give them the best opportunity to defend you.


4) If you move out of state, you need to find someone to replace you as the Resident Agent in the state where your business is incorporated.  The Resident Agent must have a street address in the state where the business is located to be a valid agent.  There are companies who provide Resident Agent services, and we can help you locate one if needed.


5) If you have a professional Resident Agent or have a friend or business associate filling this position, ensure that your contact information is up-to-date.  Your agent should have your email address, phone number, mobile number, fax number and home or office address. If papers are served, your agent needs to contact you immediately.  Don’t make it hard for that person to do a good job for you.  Like PepsiCo, it could cost you a lot in the long run.


6) If you receive notice that your Resident Agent has resigned, you must find a replacement immediately. In many states, your company will be dissolved if you go more than 30 days without a valid Resident Agent.


So remember, a Registered Agent isn’t just some “fill in the blank” spot on your incorporation papers.  This is a valid and often forgotten part of your ongoing business operations.  Take the time to make sure your Registered Agent information is up to date!