Your Customers Need You to Grow
Wednesday, July 18, 2012 at 10:46PM When I worked in my dad's family business we had a guy who handled all of our computer and networking needs. In fact we had several of them because we always ran into the same problem. Our network was not exotic. In those days the only people with exotic networks were schools and 50 plus workstation businesses. From time to time a network connection would fizzle or a piece of software would stop working or a printer would go on the fritz. We would call our guy and wait for him to show up to fix the problem.
During the first year or so after hiring a new IT guy things would go great. We would have the occasional problem, place the call, suffer through the afternoon, and he would come fix the problem. But as word got out and the IT guy's client base grew it would take longer and longer to get a response. This pattern became so predictable that I remember asking the last IT guy that I hired "are you committed to growth, because if you are not going to grow your business we are not going to hire you."
We needed him to grow. I knew we were always going to be small potatoes. Our network might add one or two machines, but we were never going to rival the bank across the street or the HR company across town. These were the clients he wanted to work with down the road, and when he did I needed to know there would be someone else on his team to take care of us. Your customers expect the same of you.
Most small businesses start out with owner/operators that handle critical customer facing roles. As the owner's business and managerial skill sets develop he eventually wants to move out of some of these roles and on to what are perceived as bigger and better things. These are good things. They are the things that entrepreneurs do. But while the owner's skill sets have grown the business as a whole may not be ready to move forward. The owner has to make sure that there are people who have been trained in those tasks that he or she is leaving behind. Or the business has to make a strategic decision not to serve those customers any longer.
Take the example of a real estate agent. At first the average home sale of this agent is $150,000. As experience, skill sets and referral networks grow there comes a day when the last three listings are for homes in the $500,000 - $600,000 range. Now, when a homeowner with a $175,000 listing calls in the agent has a problem. If the new listing is taken the customer may experience the second-class citizen problem of poorer service and less responsiveness. Even if service doesn't slip the agent may feel like the listing is a waste of precious ability and resources.
To solve this the agent can commit to growth by bringing on a junior agent. When the junior agent comes on board do you think he will be spending time on the $175,000 listings or the $500,000 listings? It makes the most sense for the veteran to let the rookie replace him on the lower end of the business. This frees up capacity to serve the higher end of the market, and it helps insure the veteran agent's skills will continue to improve as more time is spent in the more challenging market.
But the agent has another choice as well. He could make a strategic decision to tell the $175,000 listing that he cannot take any new business in that range. This is not a growth strategy as much as a niche or specialization strategy. It still allows the agent to spend more time in the higher area of the market, but it also has the disadvantage of failing to capitalize on all the goodwill previously created serving customers in the lower end of the market. And, in truth, it is the less entrepreneurial strategy. It is not the one current customers prefer because there is a very good chance that the agent's ability to sell a more expensive house is going to outpace the customer's ability to buy a more expensive house.
If you are good at what you do this will usually be the case. You will grow and develop skill sets faster than your legacy customers can take advantage of them. This means that you will rarely get to use your best gifts on the customers who have been with you the longest. You owe it to those people to leave a wake of well trained, conscientious employees who are eager to serve them in ways that will honor the start they gave you.
If you feel like you are being held back because you have not yet committed to growth here are some things you can do.
Make a list of the customers or customer types that you are serving now that are also holding you back. These are interactions that are not increasing your professional competency even though they may be contributing to the bottom line.
Figure out how much you would have to pay someone to take care of these customers for you.
Sets sales targets at the lower end of your market or service spectrum that will allow you to hire that person and spend more time where you should be.
Execute against those sales targets, hire the person, train them to take over the customers at the lower end. Rinse, repeat.
When it comes to the numbers many people have a hard time getting their head around the concept so I will provide an example. Let us say your company makes custom boats. To date you have sold mostly 18-24 foot models. You believe the future of the company lies in higher margin hull designs in the 32-40 foot range and wish to purchase two molds to move into this market. The only thing stopping you is time. You do not have the capacity to sell to existing 18-24 customers while prospecting or the 32-40 foot buyers.
Instead of trying to split your time you need to focus intensely on increasing sales in the 18-24 foot category. With help from your CPA you determine that eventually you will need a $60,000 per year sales position to handle the 18-24 customers full time. With benefits and taxes this comes out to about $6,000 per month. The average gross profit on an 18 foot model is $2,500. Therefor you need to increase sales by at least three units per month to be able to afford the new salesperson.
You assemble your team and determine the best strategy to increase unit sales an average of threes units per month, and then you execute like crazy. When you have hit the mark three months in a row you pull the trigger on the new hire and dedicate yourself to getting the new 32-40 foot models into production.
This is not rocket science, but it does require some forethought and some discipline. With proper planning and execution you can make sure that all of your customers are being taken care of and that you are continually advancing your professional competency.
Reader Comments (3)
Great post Joey. Love the examples and growth is a must. If I am not growing, I am dying.
Nice way of writing a post to make others understand what you want to say... keep it up.....
Interesting article and simply writing for anyone to understand. Yes customers are priority and entrepreneurs must be aware of this all the time not only when at the start of the business. Too many small business have failed because of lack of competent workers and excellent customer service.
Great thoughts for any business person to ponder and apply to their business concepts.