Businesses require strict adherence to budgets and financial forecasts so that cash flow does not limit life’s sustainability. Michael, being an electrician, needs to understand that he is the service industry. Thus, there is a need to form a strong customer relationship that shall aid in creating more business and improving services to retain the ties formed. By following the concepts of activity-based management (ABM), Mike must analyze the profitability of each segment of service provision by looking at the time and amount of work (Adamova, 2022). That means he should be able to charge fairly according to the time taken and perform a top-notch service to his customers so that they grow to trust in him and refer him to other potential clients.
There is a need to have activity-based costing that focuses on the processes, management, and improvement of performance in a given area of specialization. In this case, Mike needs to estimate the distribution of his skills in various parts of his customer cycle and determine the weak points and strong areas to plan for his money sustainably. The customer identification theory provides that people are unique based on personal identity and develop social identity depending on the group to which they belong (Adamova, 2022). Therefore, Michael must learn to focus his services on the old and clients with the potential for high incomes.
Michael will be required to gather data and organize all his clients according to their likelihood of engaging him in business. For example, if he gets a new client who is young and active in working, he should build a network with them for other leads. That will assure him he has a consistent flow of work, creating more revenue. Michael is currently experiencing what is known as at-risk customers since they have changed their lives due to retirement, and most of them have fixed incomes, meaning they will not be offered frequent jobs. Those are lifetime customers who will likely determine Michael’s future engagement by utilizing referrals to expand his business.
Reference
Adamova, G. (2022). Activity-based cost accounting as a tool for strategic company management. E-Management, 5(2), 45-52.