Cut delivery cost nine ways

1. Why cost is a lever

Lowering what it costs to deliver is the second of the eight ways a customer becomes worth more, listed on SOP 72 — Generate tiers and downsells from the quality vectors. You deliver the same thing for less, and what you save becomes gross profit. Gross profit, and the lifetime figure built on it, are worked out on SOP 55 — Compute lifetime gross profit and the ratio that gates spending.

Cost has a floor that price does not. A price can keep climbing with no ceiling; a cost can fall only as far as zero. The way of thinking still pays: working through the levers can make a business more profitable and easier to scale.

2. The levers, i to ix

The levers are given for services and numbered i to ix. The last one also names physical products.

i. More customers per employee. Raise the number of customers each employee looks after. An account rep who handled 5 clients is given 10, and that is said to cut your costs in half. Checked against those figures, the rep's cost for each client halves. The lever's heading words the ratio the other way round; its example and lever iv run it as customers per employee.

ii. Offshore talent. Look for people with the same skills in countries where the standard of living is lower. Costs can fall as a result, sometimes by 80 percent or more. Doing it is described as free and open to anyone.

iii. Sell to similar customers, and productize delivery. Sell to more customers who resemble one another and share similar problems, so that one set of delivery methods serves all of them instead of a tailored solution for each. Think templates and automation. Delivery becomes faster, more consistent and more profitable.

iv. Done for you to done with you. In effect this changes the ratio of clients to staff as well, but it is different enough to stand on its own. Move what you sell from doing the work for the customer to helping the customer do it, and the number of customers each employee can carry can go up sharply. If the switch costs you only a small cut in price, it can be a very profitable one.

v. Cap usage. Put a limit on how much a customer can draw. A video editing agency, for example, can cap how many revisions a customer gets, so no one drains your resources without end, and then charge for each use past the cap.

vi. Lifetime to annual. Where you now sell lifetime access, sell a year of it instead. One purchase then no longer commits you to serving that customer forever.

vii. In person to remote. Delivering remotely costs both you and the customer less, in travel and in finding people to do the work.

viii. Cut meeting time. Pointless meetings are called one of the biggest sources of waste in a business. They pull employees off their work, and when customers sit in them, the customers lose the time too. Once a quarter, delete every recurring meeting in the business. Then put back only what you find you need, and for each one you put back, see if you can run it in half the time or less. The point is to keep things as tight as they can be for you, your customers and your staff.

ix. Buy in bulk and prepay. If you have the cash, prepaying your vendors can lock in discounts of 10 to 20 percent from all of them. This is likened to a guaranteed return on investment and called well worth doing: offered a sure 20 percent return on your money, you would invest, and locking in a discount follows the same logic. For physical products, buying in bulk works the same way.

3. The action step

Write down or circle the top two levers you think you could put in place in your business to lower what delivery costs you. Then set a date to put one tactic in place; that is the line given for cost in the closing checklist of the eight ways.

4. What this page does not decide for you

• Which lever comes first. The levers are not ranked, and the choice of two is left to you. Not established on this page.
• What levers iii to viii save. This page gives no figure for the savings from levers iii to viii.
• How far a price may fall in lever iv. A small price cut is said to leave the switch profitable; the point where it stops being profitable is not established on this page.
• Physical products. Only lever ix names them. Whether the other eight carry over to a product business is not established on this page.

5. The checklist

Lever	What to do
i. More customers per employee	Give each employee more customers; an account rep moved from 5 clients to 10 is said to halve your costs
ii. Offshore talent	Hire the same skills where living standards are lower; costs can fall, sometimes by 80 percent or more
iii. Similar customers	Sell to customers alike enough to share one delivery method; templates and automation
iv. Done with you	Help customers do it instead of doing it for them; it can pay well if the price falls only a little
v. Cap usage	Limit use, such as revisions, and charge per use beyond the limit
vi. Annual access	Sell a year instead of a lifetime
vii. Remote	Deliver remotely instead of in person
viii. Meetings	Once a quarter, delete every recurring meeting; add back what you need, in half the time or less if you can
ix. Bulk and prepay	If you have the cash, prepaying vendors can lock in 10 to 20 percent discounts; bulk buying for physical products
Action	Circle the top two you could put in place; set a date for one

6. What this page does not cover

Raising the price instead is SOP 128 — Test price with a step size and a cadence. The rest of the eight ways, and several of these same switches (remote in place of in person, done with you in place of done for you) used to build a cheaper version to sell, are on SOP 72 — Generate tiers and downsells from the quality vectors, section 4. Working out gross profit and lifetime gross profit is SOP 55 — Compute lifetime gross profit and the ratio that gates spending.

Employment law and offshore contracting rules are not covered on this page.