Is It Time to Fire Some of Your Customers?

The customer is always right. Correct? Wrong!

The RIGHT customer is always right for your business. Unfortunately most of us don't know who the right customers are for our business. So we take on board anyone who has a heart beat, without ever identifying the right customer profile for our business.

But who is the right customer for your business and how do you identify the ones to avoid, or actively send elsewhere? Master this and you will build a much stronger business in the long term, have happier staff and more money in the bank.

FIRSTLY, IDENTIFY YOUR PERFECT CUSTOMER.

One of the best ways to identify your niche is to paint a picture of the perfect customer for your business. Which customers do you love to deal with? Which customers are the most profitable and professional? Which customers pay on time and never complain about the price? Which customers do you want to get referrals from?


An easy way to do this is to look at your top 20% of customers, and identify what they all have in common. It could be a common need or amount of money they spend with you each month...or how often they buy from you.... or where they live.... or why they came to use your products or services in the first place. Are they '30 something", with 2 or more children who live on the North Shore and drive a Toyota Camry?

THE MORE CLEARLY YOU CAN IDENTIFY YOUR PERFECT CUSTOMER THE MORE PROFITABLE YOUR BUSINESS WILL BECOME.

Once you have done this, then you can start to develop a strategy on how you are going to get more customers like these. It will make a HUGE difference in how you market to these people and how cost effective your advertising and marketing will be. History is 20/20 vision and a great information source for your future, only if you use it to your advantage. Every ad that doesn't work or campaign that doesn't get you results is a learning opportunity... but only if you learn from it.


DON’T GET DISTRACTED BY THE “D” CLASS CUSTOMERS

The idea of actively sending a customer away from your business, possibly to a competitor, is contrary to what many business owners this is logical practice. But pick your customer (or prospective customer) and it can be one of the most empowering feelings that you can achieve in business and will set you on a path to better profitability and better customer service.

The customers to chase away are the ones who seldom buy from you, often complain about minor things, are often the slowest payers and generally a pain in the butt. While you were building your business you put up with this type of buyer, because you felt that any business was better that no business. In reality this type of customer is unprofitable and you would have probably been better off without them to start with. If a business has too many ‘D’ class clients then it surely will go bust, life will be hard and the business will be too susceptible to all sorts of troubles from employees not wanting to work there, to deliveries going missing, to dirty workspaces etc.

Now you know better, so go out there and target more “A class” customers to build you business on and while you are at it, save you and your staff a lot of grief by firing a “D class” customer or two.

For help in defining what sort of customer is right for you an d how to attract more of them, email the author at andyburrows@iconbusinesssolutions.com

The Power of Margins

If there is one certainty in a growth business it is that it is going to consume all the cash you can get your hands on.

If all you had to do was fund work in progress, you just might be able to cope, but there are very large costs associated with growth which need to be funded well in advance of sales. Staff need to be recruited and trained, accommodation needs to be in place, inventory needs to be purchased and stored, computer software and hardware systems need to be implemented and so on. Infrastructure and support costs are lumpy and often need to be in place well before they are needed. Without access to a ready source of cash, growth businesses stall and lose their momentum.

The obvious solution is to have a source of finance available to meet the increasing demand for funding. But banks tend to shy away from high growth enterprises, as they typically don't have the bricks and mortar to secure the debt. That leaves equity funding as the only practical external source of funds.

However, new equity dilutes existing shareholdings. If the business is privately held, then the funds will have to come from the private equity sector and the money will come with conditions.

The only practical path out of this trap is to generate higher levels of cash organically. You do this by increasing margins - reducing expenses or increasing prices. While this may seem a bit impractical, in fact, the high growth business is well positioned to do exactly that. While some progress may be made by reducing expenses, the major source of extra cash will need to come from increasing prices.

High growth businesses are in a unique position. They achieve high growth because they have a number of key product/market characteristics. Typically they satisfy a compelling need, have a sustainable competitive advantage and target a well defined niche market.

Generally, they work in emerging markets where demand exceeds supply. This unusual situation actually allows them to push up their prices as, at least at the margin, the market is not sensitive to small increments in price. A lift in prices increases their margins and generates additional free cash.

Apart from fuelling growth, higher margins allow the business to take greater risks, recover from mistakes and fight off competition. It is like having a war chest which you can use at your discretion to use in the best interest of the business. It could, for example, be used to increase the rate of R&D and thus improve your long-term competitive position or it could be used to undertake an acquisition to overcome a market or growth constraint.

We should never take our sales prices as a given. By changing product positioning, target customers, problems addressed and distribution channels, we can often find ways of increasing the price and therefore the margins. Any sustainable increase in margins will greatly improve the resilience, growth prospects and profitability of the business.

Where is the new customer? He's in the new world... are you?

This week I have a guest post from Jeffrey Gitomer. Jeffrey is a leading expert in the area of sales and sales management. If you want some no-nonsense advice and techniques to improve your sales conversion, I highly recommend you buying one of his sales bible books.

"The customer is making a comeback - slow though it may be. And when he (or she) returns, you're going to notice a change. A big change. FAIR WARNING: How you prepare for the new customer will determine your long-term success.

REALITY: While your customers were away, online has officially taken over. It's the new showroom and comparison shopper. You can chat, or phone in a heartbeat. You can see every option and some you never knew existed. It's fast, it's accurate, and anyone can choose anything, any time of the day or night.

Yes, the Internet has been there for a few years, but it has taken a firm hold as a trillion dollar option for consumers and customers every place in the world. Your world.

It's a different world now. We are not going to "recover," per-se. We're going to revive and revise. And you can be in it, or watch it pass you by.

Here are some examples of "different" on the business side. Car dealerships, stock brokerages, insurance companies, banks, homebuilders, commercial real estate agents, residential real estate agents, and mortgage lenders have all revised and restructured their business - and that's the short list.

And the customer is different too. Way different.

Let me give you the details of what the new customer (both business and consumer) looks like: (NOTE: I'm using "he" but I also mean "she.")
* He's going to decide somewhat slower. He's been hesitating for more than a year.
* He's angry about the value of his home, and the value of his investments.
* He will not be doing business the same way it's been done before.
* He will not be banking the same way he banked before.
* He will not be advertising the same way he advertised before.
* He will not be buying a car the same way he did before.
* He will not be buying a home the same way he did before.
* He will not be investing the same way he did before.
* He's online. Checking out your website - and your competitor's website.
* He's socializing. Telling everyone what's happening in his world and the world.
* He's Tweeting, Facebooking, and Linked-In-ing. Social media is still a firestorm.
* He's blogging about his experiences with you, for the world to read.
* He's YouTubing about his experiences with you for the world to watch - by the millions (any questions United Airlines?).
* He's Googling, not yellow-paging.
* He's texting. A lot.
* He's using his mobile device to do damn near everything.
* He's WiFi-ing in his hotel room, on the plane, in Starbucks, and at home.
* IF he's reading a paper, or getting the news, it's online.
* He's as likely to watch The Daily Show, The Colbert Report, or listen to Howard Stern for news as he is to watch a network "news" person read a tele-prompter.
* He's purchasing after midnight. By the billions.
* He's looking for ease of doing business with you.
* He is value oriented, but will look to price as part of the decision.
* He wants a relationship.
* He wants, needs, and expects GREAT service after the sale.
* He does not want to wait for anything or anyone.
* He needs help and expert advice.
* He's looking for ideas and answers.
* He can check your price and your facts in two seconds or less on Google.
* He knows as much about your product as you do.
* He knows MORE about your competitor's product than you do.
* He can pay right now IF you can take a credit card online.
* He expects someone to answer the phone when he calls that can actually HELP.
* He is SICK of off-shore call centers, erroneously called "help desks."
* He is SICK of you telling him how important his call is while he stands on hold.
* He is SICK of your recorded hold message.
* He demands the truth. All the time.
* He no longer trusts the institutions he used to hold sacred.
* He expects you to be as computer literate as he is.
* He needs to be understood and feel your sincere concern.
* While you are qualifying him, he is qualifying you.
* If he needs a referral or recommendation, he'll go to Craig's list or Angie's list or Google or his next door neighbor, or anyone else but you...UNLESS you have video testimonials online.

As you're thinking about (and making excuses about) these statements, you better be thinking about your answers and responses to them. And you better be making the strategic decisions and game plans to make them happen.

The economy is coming back - BUT NOT TO THE WAY IT WAS. Don't take my word for it. Ask any daily newspaper.

After reviewing these statements, ask yourself this BIG question: Will your new customer buy from you, or your competition?

One final warning that is only available online. Go to www.gitomer.com and enter the words NEW CUSTOMER in the GitBit box."

Jeffrey Gitomer is the author of The Little Red Book of Selling and eight other business books on sales, customer loyalty, and personal development. President of Charlotte-based Buy Gitomer, he gives seminars, runs annual sales meetings, and conducts Internet training programs on sales, customer loyalty, and personal development at www.trainone.com. Jeffrey conducts more than 100 personalized, customized seminars and keynotes a year. To find out more, visit www.gitomer.com. Jeffrey can be reached at +001.704.333.1112 or by e-mail at salesman@gitomer.com

The Best Advantage in Business

A lot of people (including me) talk about competitive advantage and how it is vital to the ongoing success of a business. This is very true, but what is the BEST sort of competitive advantage to have and what is plan B if you don’t have one.

Without doubt the best competitive advantage to have is competitive UNIQUENESS. This means the features of your product or service that is unique in the market and your competitors cannot match it. This could mean that your whole product or service is totally unique, or perhaps just certain features of it. For example, you may have a unique chemical compound for preventing rust on marine steel, protected by patent, that no one else has available. This is a totally unique product. Another example could be a photocopy machine that has a unique feature of low toner use. Lots of other companies have photocopiers that do what yours does (in general terms) but don’t have your one unique feature.

Does your product or service have elements of uniqueness? If so focus your marketing on these points. Target customers who will benefit from that particular feature and dominate that segment of the market.

Don’t have a UNIQUE advantage with your product or service? Don’t worry. All is not lost. Plan B is to look at your offering and determine what your COMPETITIVE advantage is, i.e. What do we do/offer to our customers that our competitors also do, but we do it BETTER and we can prove it? This will also provide you with a focus for your marketing and sales efforts and provide a better return on investment. Going back to my rust prevention compound, an example of competitive advantage would be where two companies have the same type of compound available, but one can be applied to wet or dry steel, but one can only be applied to dry steel. The ability to apply to wet OR dry steel is their competitive advantage.

If no competitive advantage exists, you may need to create one by focussing on the reputation of your company, use of customer testimonials, adding extra value through enhanced service to create a positive reputation.

For help in determining YOUR competitive advantage and what to do with it, contact the author at andyburrows@iconbusinesssolutions.com

A Problem Shared....

Last month I started the first group “coaching” program for 2010, called the Icon Business MasterClass, at my office in Albany. Participants are well through the first “Your Business Defined” diagnostic phase and already seeing the benefits of coming on-board.

I knew from my experience that participants would receive tremendous value in the 3-way analysis that is conducted on their businesses, but I was pleasantly surprised of a benefit to the program that I did not rank nearly as high as the participants themselves.

That benefit is the power of working in a group of like minded business owners and the opportunity to share their dreams and frustrations with people who they don’t know (yet), but can relate to very easily. This benefit is ranked ahead of the much lower cost that the group format affords and was the key driver to most people joining. The fact that they can save themselves a heap of money in the process is just a bonus!

If you have been thinking in the back of your mind that getting some outside advice on the business would be useful, but the cost and risks of signing up to an intensive 1-on-1 program are too high, I urge you to look at a group training type program. Obviously I would like it to be mine, but it doesn’t have to be. Look around in your area as to what is available, weigh up the benefits and costs of each and then DO IT. You won’t regret it, as long as you implement what you learn, steadily and consistently through the program and beyond.

For further details on how my Business MasterClass works and the commitment required, send me an email to andyburrows@iconbusinesssolutions.com

When Will Business Owners Take Exit Planning Seriously?

My last posting mentioned that there are a lot of businesses out there that will be coming on the market in the next few years and not many owners who are doing anything constructive to plan for a successful and lucrative outcome. Many owners seem to have their heads in the sand, or simply not the time available to put some thought into what options exist out there to exit their business and what tactics are then required.

By way of comparison I have met two business owners recently going through the exit process, but with very different stories. Both are true stories, but I have changed names to protect their identities.

Owner A (let's call him Jim) owns a small plastic injection moulding business. He has owned it for more than 20 years and is aged in his early 60’s. In recent times it has gone backwards a bit and his original business partner has pulled out, leaving Jim as sole owner. The facilities look tired, but the machines are in good condition. No long term contracts are in place from customers, but they do receive regular orders due to their high quality reputation. Jim still owes a significant amount to the bank for the purchase of one of the injection machines, secured on his private home. The business is in leased premises.

Jim wants to exit the business and due to no long term plan in place is looking at the most likely scenario of selling the machines, shutting the doors and walking away from the business, still owing money to the bank. Not much of a retirement to look forward to.

Contrast this with owner B (Lets call him John). John has owned an optometrist practice, for about 15 years. It started as a sole practice, but it grew to employ another optometrist, originally shared with another practice. About 8 years ago John realized that one day he wanted out of the business and to follow his passion for travel and geology with his wife. A couple of years after that he needed to hire a new optometrist graduate and was lucky enough to hire Sally. When John broached the idea of Sally buying into the business, she was enthusiastic and a plan was put in place. A new company was formed with both Sally and John as shareholders. A shareholders agreement was thrashed out and a share valuation conducted. Over the next 5 years Sally has slowly invested her drawings into buying John’s shareholding and within the next couple of months this process will be completed and John leaves on the first of what he hopes will be many trips overseas with his wife.

Which outcome do you want for your business and your life? Putting some longer term planning in place will help you achieve a successful exit from your business, or at least maximise the chance of a successful exit happening.

Join me in a 2 hour workshop in Albany on March 3 to start this process off and start planning what you will do when your exit plan has been successfully executed. Register by emailing me at andyburrows@iconbusinesssolutions.com Tickets are $49 +gst per business.

Put the Success into Succession Planning

According to a study by the Centre for Small Enterprises at Massey University, during the next 10 years 64% of business owners intend to exit their businesses. For the North Shore, where I live, that means about 16,000 businesses may come up for sale during the next 10 years. That’s 130 a month, every month, summer, winter, good times and bad, for a decade!

If you are thinking about selling your business during that time, do you think you will achieve the sale price you need to fund your ideal future in such a potentially crowded marketplace? Of those business owners who intend to exit their business in the next 10 years, 70% intend the sale to fund their retirement, but 87% have no formal plan on how they will do this.

The message of planning a successful exit from business has not yet been taken to heart by the majority of business owners and this may result in a lot of unfulfilled dreams of a long and happy retirement. The general attitude of: “I’ll get round to it when I have to,” is all too prevalent and the point of early planning to maximise value at exit is lost on many.

To a lot of people, exit planning is viewed in a similar way as painting a house before it is put on the market i.e. something done close to the point of sale. Yet good exit planning should start much earlier. The benefits will be a wider range of exit options and a bigger pay cheque for the owner on handover day.

So what are the recommended steps?

1. Decide to put a formal exit plan in place and include it in the general, long term planning of the business.
2. Determine the strategic and tactical decisions that are required to progress the plan.
3. Look at risk factors that could knock an exit plan off its course, such as: shareholders’ agreements, share types, wills and shareholders’ insurance.
4. Look at all the exit options available and draw up a short list of the most preferred.
5. Establish a personal plan for the owner(s) to make sure as much of this value ends up with the owner(s), with the least tax paid and a long term retirement plan in place.
6. Identify and deal with possible impediments to a profitable exit.

If nothing else, following this process will result in a business that is running better, with higher profits and less reliance on the owner. At best it will result in the type of comfortable retirement that the owner wants and enable him or her to really enjoy the fruits of their labour. Not following it could result in the owner standing in line with lots of other business owners with similar offerings, hoping for a quick trade sale while facing retirement not as well off as hoped. The choice is yours.

To learn more about this process, join me at a workshop on exit and succession planning on the 3rd of March in Albany, North Shore City. Email me at andyburrows@iconbusinesssolutions.com for venue details and time.

A final word:

“The best time to start planning your exit is from start-up. The next best time is NOW!”