We can’t all be natural born business superstars – but that doesn’t mean we can’t grow a successful business; we can – because we are all capable of learning.
In this chapter we will try to understand a very basic question of how a business grows.
So how does a business grow?
In ‘Customer Pillars’ (which you can download free from www.famee.org) Curt Clinkinbear writes that if you want to double your business income you need to do one of the following:
- Double the amount you make from existing customers.
- Double the number of customers you have.
- Double your prices.
- Or a mixture of all of the above.
That’s as simple a description of how a business grows that you are ever likely to get – though of course that’s not the same as saying that that growing your business is easy. Of those options, the quickest and least painful way to grow your business is by concentrating on your existing customers.
1. Plan to double the amount you get from existing customers over the next year.
Most businesses know that they should concentrate more on their existing customers; they have read that it’s easier to sell to an existing customer than find a new one. However, even knowing that, they still tend to spend more money and energy trying to find new customers. This is a mistake.
Before chasing new customs you should be thinking about how to provide greater value to those you already have; do this and your business will grow naturally.
In Customer Pillars Curt tells us that we should be spending at least 50% of our marketing and sales time and money on our existing customers (and 25% trying to re-activate and sell to lapsed customers).
When you have existing customers who feel they are getting value from the business relationship and feel that you are genuinely keen to help and to provided the best possible services or products – those customers become your sales force. New customers will result from your sales force evangelising about you and your business.
The folding bike-maker Brompton does not advertise, instead they rely on their happy bike owners to tell their friends and to drive sales.
“Our idea of marketing is to produce a great product and look after the customer,” says Mr Butler-Adams. “Do this and they become evangelical about you.” Will Butler-Adams, the boss of UK folding bike-maker Brompton
Retain existing customers and grow revenue from those customers
- Review your customers to be clear which customers are you best and most profitable; these are the customers you will concentrate your energy on.
- Strengthen the relationship with your existing customers: keep in touch with them more often and try to ensure you have a clear idea about what their needs are and how you can meet them.
- Develop new services or product you can sell to them.
When reviewing your customers:
- For all of your active customers calculate what their average yearly spend has been?
- For each customer calculate what their overall spend has been and what their average yearly spend is. This will tell you who your best clients/customers are – and therefore who to give most attention to.
- Group your customer database in to active and lapsed customers (have you invoiced them in the last year? If not think of them as lapsed).
- Group your customers in as many different ways as you can; e.g. in my case that could be: sector, size of budget, number of staff, geographical area and so on. This will help you get a better understand of what sector you are in; which will help you when you are trying to get new customers.
- Now work out your customer retention rate, i.e. how many customers who bought one year didn’t buy the next. If you combine this with the record of how many new customers you got across the same period you will have a clear picture of how/why your business is growing or not growing. Clearly if you losing customers quicker than you are gaining them that’s not a good sign.
TAKE ACTION: Create way to record the results of the above exercise; maybe an online task management services or a simple offline workbook.
The more successful you are at retaining customers and growing revenue from them, the less pressure you have on your business to keep chasing new customers.
As Curt Clinkinbear imaginatively puts it; keeping existing customers is like closing all the leaks in a damn; as water flows in the level rises; water flowing in is you getting new customers; sealing the leaks is you taking actions to retain your existing customers.
You do this by providing better and more services to existing customers and by re-establishing contact with lapsed customers.
Re-activating lapsed customers
In your earlier exercise you worked out the average spend of your customers; so if you can make even a small number of lapsed customers in to active customers again you can easily calculate how much this will add to your revenue for the year.
Your profits should increase as your overall revenue increases. However, that is not guaranteed; your costs may also be going up. So ensure you are keeping a record of the extent your profits are increasing (or decreasing) as a result of new business. There will be no point in have more customers or providing more services if that isn’t leading to more profit.
Think, what can you do for your existing customers that you are not currently doing.
- What services and/or goods are they buying from your competitors; can you provide the same thing only better?
- What can you do to help them grow their business or make things better for them?
- Can you help them be more efficient or make their processes easier?
- Can you add value to the things they offer to their clients/customers?
- Can we do anything to reduce their worries and fears?
TAKE ACTION: Choose three of your most profitable customers and Try to find answers to each of the above questions.
Ok here’s an example from my own personal experience. I’m in the Web design and development business, I specialise in accessible website design and my target group is non-profits. So what new services can I develop and sell to my existing customers.
First I can research other web design agencies in the same sector and take note of what they are offering
- Usability as well as accessibility testing
- Some provide free fundraising tools
- Online Marketing tools
- SEO (Search Engine Optimisation) service
- Help with Newsletters and newsletter setup.
- Security related products/services?
- Website redesign
- Mobile and tablet site design
- App development
- An on-going support service
- Online training courses
- WordPress related services
- Branding development and support
- help with pitching for funds
- Providing reduced rates for charities
- Content reviews and rewriting
- Web site maintenance, upgrades, and complete redesigns
- Web site usability audits
- Web site planning, mapping, and design briefs
- General web site consultancy
- Help with Fundraising campaigns
- Mass mailing and marketing
- Membership management
- Event administration and publicity
- Case management
- Community building: seminars
- case management softwares
There are some things in this list I don’t do – so armed with the knowledge of what other companies are offering I can now make appointments to visit my best customers to look for opportunities to help them achieve their aims.
Although most of my customers are not businesses and are not trying to grow in the conventional sense, they do all have targets to meet – whether that be numbers of volunteers or numbers of people given assistance, or number of people trained or finding work, or number of people given information. This therefore should be something I can focus on, i.e. how to assist them in meeting their targets as outlined in their funding applications.
I can become aware of their targets and think about how I can help them meet them or how they can provide greater value to their target groups and networks.
My aim is to:
- improve communication with my clients and prevent them from going elsewhere.
- Think about how I can help them be better at what they do
- Increase the trust in my business and what it provides
- Sell more of what I already sell.
- Expand my products/services in response to their needs.
“The company that best understands their customers and prospective customers is in the best position to be the industry leader. So define, study, and learn to gain greater knowledge of and intimacy with your customers.
“. Curt Clinkinbear Customer Pillars
To sum up, before you even start to think about strategies to attract new customers make sure your current customers are happy and that you are providing them with all the services or products that will help them meet their goals. Do this well and your own business will naturally grow.
In the process of keeping your existing customers happy you will discover a lot of valuable things that should help you in your marketing – when you spend that 25% of your marketing time trying to get new customers. For example you will have a better idea of what your customers needs are and what services you can provide to meet those needs.