I work with many business owners who are very often so focused on customer acquisition that they forget about how important and cost-effective customer retention is. According to the Harvard Business Review, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. Research by Frederick Reichheld of Bain & Company shows that increasing customer retention rates by 5% increases profits by 25% to 95%.
One strategic business approach that I often recommend is to go deeper with the clients you have rather than invest the time to attain new ones. I’ve outlined below several tips to help you improve your customer retention rate:
Are your customers leaving you? If you want to improve your customer retention rate, you need to be aware of how many customers are leaving (the churn rate) and determine what is causing them to leave. Ask yourself what as a company you are doing that is causing your customers to leave.
Customers don’t buy from companies; they buy from people. 60% of all customers stop dealing with a company because of what they perceive as indifference on the part of salespeople (Peppers and Rogers Group). Have your salespeople become complacent? Are you making an effort to make your customers feel valued or do you take them for granted? Are you rewarding your loyal customers for their business?
Listen to your customers. Talk to your customers – after all, they chose you. Invest the time to ask them how they feel about your products/services. Understand what they are looking for and what their plans are for the future. Personal relationships are powerful and inspire loyalty. The customer experience is key to your success.
It’s not all about price. Companies are often totally focused on being the lowest cost provider. While being competitively priced is very important, there will always be someone who can come in at a lower price. Price alone won’t keep your customers; delivering the best value will. Value is a combination of price, trust, customer service, delivery, relationships and support.
Has your company lived up to expectations? It’s one thing to win the business; it’s another thing to keep it. Make sure your brand has delivered on its promise and your product/service meet or exceed expectations. Take a look at creating a great customer experience. Managing customer expectations is an important part of customer retention. Set realistic expectations. It’s better to under-promise and over-deliver.
Communicate! Communicate! Communicate! Communicating with your customers will keep you top of mind. Remember, there is always going to be someone lurking in the wings to swoop in and steal your business. Find out how often and by what channels your customers want to receive information. Always address your customers’ concerns immediately. If you make a mistake, own it and fix it. Your customers will appreciate your honesty and your efforts.
Do you prize deliverables over results? Every deliverable must be able to show a measurable result that will positively impact your customers’ business and help them achieve their goals and objectives.
Bonus Tip: Conduct an exit interview. There is no company in the world that retains 100% of their customers, no matter how good they are. If one of your customers is leaving, take it as an opportunity to improve. Conduct an exit interview to learn why they’re leaving. This information is extremely valuable and can help you to make changes in order to avoid a similar situation in the future.
Are your customers leaving you? Want more advice on customer retention, or general advice from other business owners like you? Find out if a TAB Board is right for you!
Whether you’re considering selling your business, or are just interested in knowing how to put a value on your investment, the evaluation process can often prove difficult.
There are a number of factors you might want to consider when evaluating your business’ net worth.
Your team, assets, processes and recurring revenue are key factors in evaluating your business when reviewed with the net earnings and cash flow. These key factors help to reduce the buyer’s risk and significantly increase the multiple used in the transaction and the total company value. Ultimately, the business is worth whatever the buyer thinks it’s worth, but you can estimate your value by looking at several different factors including the ones I’ve shared with you below:
Consider your team
When evaluating the value of your business, it is important to include the key employees and management team. Buyers generally require a strong management team to continue to run the business and are concerned with your own knowledge of the business — relationships, processes and ideas. They’ll question what the impact will be on the company if the owner is no longer operating the business.
Look at current business processes already in place
A business process is a set of steps or tasks that you and your team use repeatedly to create a product or service, reach a specific goal, or provide value to a customer or supplier. When processes work well, they can significantly improve efficiency, productivity, and customer satisfaction. This is an ongoing process, but ensure you have a plan in place to document all of your processes. This allows a buyer to see how you process your offerings and allows them to see what is involved in the operations of your business and can show your business is independent from you.
Assess the recurring revenues
Recurring revenue is predictable revenue that can be expected to continue in the future. It makes a company more stable and certain, both operationally and financially. Having recurring revenue as a portion of your total revenues lowers the risk associated with a company’s operations, and can help your company withstand a hiccup in sales. Establishing recurring revenue isn’t only good for business – it ensures you’ll get the maximum value when it comes time to sell.
Evaluate hard & soft assets
A company’s assets are an important factor to consider when determining value. There are hard assets, such as equipment, furniture, and inventory, and there are soft assets, such as patents, trademarks and software. Consider if all of your business’ assets are for sale or if you plan to include accounts receivable and inventory. Hard assets have value, which can be calculated by estimating the resale value of your equipment, furniture, and inventory. The value placed on soft assets such as patents, trademarks and software, can be a greater proportion of the total value of your business than is the value of tangible assets.
Evaluating your business properly is not a simple undertaking since it concerns several factors, many of which are hard to quantify. It is recommended that business owners looking to sell their business consult with an expert in order to reach a realistic estimated price, but the factors noted above will have a significant impact on the price a buyer will be willing to pay.
LinkedIn is the world’s largest professional network, with over 300 million registered users in over 200 countries and territories, so it should come as no surprise that LinkedIn is one of the most powerful business development tools available today. Business owners and key sale leaders can leverage the power of LinkedIn for forging strong connections and finding new business.
LinkedIn has become the new “Rolodex”, the go-to place for finding colleagues, current clients, potential clients and vendors. With a professional profile, image and regular participation in groups, your network will increase, which in turn increases your reach and exposure and potential business opportunities. Many business owners would agree that LinkedIn has great potential, but are either concerned about the time commitment or are unsure how to go about getting started.
Here are a few simple steps to get you started in engaging in business development activities on LinkedIn:
- Step 1 – Look Professional: Just like a face-to-face introduction, your profile page is your first chance to make a good impression. Users with complete profiles are 40 times more likely to receive opportunities through LinkedIn. This means:
- Invest some time in writing a professional summary
- Add your skills
- Have a professional picture taken (do not take a selfie)
- Add volunteer experience and any awards you have won
They have recently added a recommendation feature on LinkedIn, which is like having an endorsement for your services. Try to have at least 4 recommendations on your profile page.
- Step 2 – Make Connections: Having a long list of connections is essential for increasing exposure and the likelihood of others finding you, but make sure they are the “right” type of connections.
- Decide if there is an industry you want to target or a type of job title e.g. accountant – simply search for exactly what you are looking for
- Once you have a few potential connections, find out more about them by visiting their profiles, seeing if you have connections in common, where they are located, etc.
- Send them a connection request by introducing who you are and the reason for contacting them
- If they accept your invitation, be active and take the initiative by arranging a phone call or a face-to-face meeting
- Step 3 – Join Groups: Think of these as a local Chamber of Commerce. There are groups for every industry, and they function as a place to ask questions, perform research, make new connections, and get noticed.
- Search groups that you think your target audience will visit
- Join ONLY as many groups as you can manage. Groups tend to send notifications, which is good if you plan to keep up with them, but annoying if you don’t
- Participate in the groups on a regular basis if you can. Your audience needs to hear from you and see you being active and offering expert advice
- Comment on other people’s posts, “like” them, and most importantly see who the regular contributors are and see if there is opportunity to work together or connect in some way
- To connect with them, follow Step 2
In addition to using LinkedIn as a business development and marketing tool, the platform can also be used for recruitment. Whether it’s sharing a job posting on your company profile, or paying for a job posting or sponsored job ad, LI allows you to see in a click of a button a more complete look at your candidates.
As you can see, LinkedIn has a lot to offer but the biggest step is making the decision to give it the time it deserves to foster and manage potential leads. From personal experience, investing time in LI as a business development tool will yield results that far outweigh that time investment.
Do you use LI for business development now? How much time do you dedicate to it and are there other features of LI that you have found helpful for business development?
Mid-sized business owners are tasked with the responsibility of ensuring that their vision, mission and goals are understood and executed throughout the company. However, what often happens is that some employees, while clear about what these are, do not know how their specific job helps to support them. Unfortunately, there is a possibility that most will remain unaware of the existence of the vision, mission and goals.
Therein lies the problem many mid-sized companies face, which is communication and support for the overall business strategy. The key to conveying these fundamentals is insuring your key management understands these so they are equipped to relay this message to their staff.
In my role as a business advisor, I am often called on to facilitate strategic planning sessions with senior management teams. I’d like to share with you an interview with one of the marketing managers who participated in a recent strategic planning session.
Q: Before the session, were you clear about what your role was within the organization?
A: No. It made my daily duties innocuous and frustrating because I did not have a clear understanding of what I was supposed to be doing. Being part of a smaller business often requires employees to wear many different hats and sometimes that can blur the lines of responsibility and accountability.
Q: How were you feeling about the company and your role before the meeting?
A: I felt my skills were not being best used in helping to move the company forward. There was no clear goal in sight or a clear idea of who we are. I became increasingly frustrated and unsure about what I should be spending my energy on.
Q: What were you hoping to get out of this meeting?
A: I was hoping to gain a clear sense of the identity of the company, roles of people in company, and vision of where the company will be next year, two years and beyond.
Q: How do you feel this session has helped you in your role?
A: Projects and initiatives are more defined in terms of relating back to the company’s identity. There is now an accountability structure in place so projects don’t fall by the wayside.
Q: Was the session valuable?
A: 150% yes! Every business needs to understand who it is, where it has been, where it is now, and where it is going. Without this direction, you are floating on the ocean without a compass. For me, it has brought clarity, defined goals and a structure to help measure success and shortcomings. It has created cohesiveness and has tied everything together to reach a common goal.
Strategic planning sessions get the whole organization pointed in the same direction and can catapult your results to even higher levels of success!
Do you feel your organization could benefit from a strategic planning session? If so, in what way do you think you could benefit from this? I look forward to hearing from you in the comments below.
As a follow up to last week’s blog where I outlined key questions to consider before starting a business, I’d like to go a step further into business ownership starting with the question what type of ownership is right for you? Most people think that starting a business from scratch is the only way to go, but other options like purchasing a franchise or an existing business are important to consider too.
With over 30 years of business experience and as the owner of my own franchise, The Alternative Board, York Region, I have seen business ownership from all angles. Business ownership is not for everyone, but if you have determined it is right for you, you should explore all your options.
The most important considerations are the level of risk, and the learning curve associated with each ownership option. I have outlined below 3 key points you that will help you decide what the right type of business is for you.
1. Starting Your Own Business
Starting your own business comes with the highest level of risk and the steepest learning curve. Most new business owners are excited and passionate about their venture, but often become overwhelmed with the amount of capital, stress, and the level of work required to get and maintain clients, as well as the continuous planning that is needed to grow the business.
2. Purchasing an Existing Company
Purchasing an existing business comes with varying degrees of risk and learning curve depending on the quality of the business you choose. With purchasing a business you really need to spend a lot of time on research and also be prepared to spend up to a year before you find a business you would like to buy. You will benefit from all the positive assets and processes of the business, but will inherit all the challenges the previous owners had.
3. Purchasing a Franchise
Owning a franchise comes with one of the lowest risk options and the shortest learning curve. You’ll need to do your homework to ensure you purchase a good franchise; one that provides all the upfront financial investment details, required training and necessary processes to successfully start and operate the franchise.
There is MUCH more to it than the few points I’ve touched upon, so stay tuned to my blog in the coming weeks for more on business ownership and the advantages and disadvantages associated with each option.
In dealing with business owners, I find that many of them wait until the last minute before thinking about selling their business, either because they are too busy, or simply too attached. In my experience, it is never too early to understand what the process of selling your business involves.
We all understand the basic concept of negotiating leverage through our day-to-day interactions with others, and it is important to understand that when selling an attractive business, you also have leverage – but only to a point. When you sign a letter of intent (LOI), the balance of power in the negotiation shifts significantly over to the buyer’s side, who now can then take their time investigating the company and exercise their due diligence.
The longer they take, the more likely you are to become committed to selling your business. A savvy buyer knows this, and can drag out diligence for months in a bid to justify lowering their offer price or demanding better terms.
Left with little leverage and other suitors sidelined, you find yourself with an unattractive deal or the choice to walk.
If neither of these options sound attractive to you, you’ll want to prepare your business before you even decide to sell. If you’re wondering just how you can do this, stay tuned to part 2 of this post next week for the answer!