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Month: September 2013

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The degree of success you enjoy in your business is directly related to your ability to continually attract new customers and to keep existing customers buying from you, again and again.

Whether you have 100 or 5000 customers, in order to get the maximum value you need to market to these customers again and again. So the best strategy is to continue efforts to attract first-time buyers…and to constantly stimulate sales from those who have purchased before. That’s where the real profits are.

The easiest and least costly sale you’ll ever make is to an existing customer. These people have already trusted you to deliver a product or service. You don’t have to sell them again on the merits of doing business with you instead of your competitor.

Existing customers are high-probability prospects for your next related product or service. Trust has already been established. When customers are satisfied with their purchases, they’re more likely to buy again and with much less scrutiny than the first time around.

To capitalize on the true value of your customer list, you need to be aware of how often they are likely to have their carpets cleaned and the average job value.

Let’s suppose that an average job ticket is £200. If that’s all “customer A” ever spends with you, the actual value of “customer A”, in terms of revenue, is just that...£200.

Now let’s say that this customer uses your company every year. Over five years, that customer is now worth £1000… or five times as much as the single-use customer!

Taking this one step further…since customer A is very satisfied with her purchase, she tells 3 of her friends about you. As a result these 3 friends also become 5-year customers. Now our original £200 customer is actually worth £4000… over the same five-year period! If those 3 newly acquired customers also referred others, the cash- generation picture gets even brighter. And it all started with a single £200 job ticket.

This is how a CD club can promise “5 CD’s for just £1”. They don’t make any money on the first transaction. In fact, they often lose money on the front end. But they also know that the value of a customer who purchases repeatedly is well worth the comparatively small up-front costs.

These companies are banking on building long-term relationships with customers. That’s the key! Successful marketing is about building positive, long-term relationships with people. Never forget that simple fact and it will serve you well in your business.

Repeat business is where the true fortune lies. That’s why honesty and integrity are so important to the business that wants to grow and flourish. Real profit is generated from subsequent sales beyond the initial purchase.

The first sale often absorbs most of the costs associated with customer acquisition. Therefore, each subsequent sale has a higher percentage of built-in profit, than the one before. It doesn’t take long before it’s all profit, less of course any overhead.

Seeing the potential value of cared-for customers can help you determine how much you’re willing to spend to acquire each new customer. Newer businesses who don’t yet have a sizable customer list, may need to spend more initially in order to establish a customer base of some kind.

Once you have customers, it’s always in your best interest to continually serve… communicate with… make offers to…and generally delight those who have already bought from you.

Keep in mind that satisfied customers usually welcome frequent contact from businesses that have delivered superior overall satisfaction in the recent past. Often, your frequent communications simply renew good feelings - something everyone likes to experience.

Following are a few ideas for maintaining contact with your customers:

·         Put in place a system of regular contact where you can mention additional products and services that might be of interest to your customers

·         Consider using tools of communication like postcards, newsletters, thank-you cards and sales letters

·         Keep the lines of communication open so customers can easily have their problems solved – regular contact makes you more seem more accessible to customers

·         Do whatever it takes to make your customers happy

·         Send out regular reminder cards with an offer

·         Provide helpful tips or pass along related information customers may find useful

In the last 12 months I’ve used over 45 strategies to get new and repeat clients to use my company again for their cleaning. I like Dan Kennedy’s story about one of his students who was asked “What ONE way would he recommend to get 100 new clients?”  His reply “I don’t know ONE way to get 100 new clients but I do know 100 ways to get one new client and I use them all”

Do whatever is necessary to stay in your customer’s thoughts. The ultimate goal is to be “top of mind”… that is to be the first (and perhaps only) source your customer thinks of, whenever she needs what you provide. This gives you a tremendous competitive edge over others and adds considerably to the true value of your business.

 

You’ve already invested capital and energy to win over customers the first time. Once you have a customer, it’s up to you to keep them.

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There are only three ways to grow your business.

The three ways are:

  1. Increase the number of enquiries
  2. Increase the number of enquiries that become jobs (conversion rate)
  3. Increase the average value of each client

This will also work with your existing client base. Most businesses focus on growing their business by just getting more new customers, more new customers. But getting a new customer is one of the most expensive things you will ever do. Yet most businesses overlook the customers they already have, even though they have spent a great deal of time and money acquiring them.

The real leverage is in working the ’back-end.’ In other words, focusing on the customers you already have and selling them more of what you have or selling them a different service that they haven’t had from you.  Now, why does this make sense?

Well, it’s much harder to get a prospect to use you for the first time as opposed to getting an existing customer to use you again. Depending on which studies you read, I’ve seen reports stating that it’s between six to sixteen times easier to sell to your existing customers than it is to get a prospect to use you for the first time. Why is this?

It’s because you need to win them over... to get them to trust you. After all, we work in peoples private homes. And they are very careful who they let into their homes. Also we go where other contractors do not. We work in their bedrooms and other private places and see things that other workmen do not. They really do need to trust us before they let us do that. So it’s foolish to build up that trust and then simply let the relationship go.

But are you thinking “my customers are ‘loyal’ and will always know how to find me?”

In todays busy world, customers forget their suppliers very quickly...even if they are satisfied! It has been estimated that every month that passes by without contact, a customers loses 10% of their ability to recall who they bought from. So after a year...its all gone! That’s why it’s important to have regular customer communication, even if you have delighted customers.

This alone will increase your number of enquiries..and is much cheaper than the cost of getting new prospects to trust you. Your conversion rate should also be better than normal because these are customers who know and trust you. They already know the quality of your work and service. You are also increasing the average value of each client as the cost of acquiring them the second time is much lower. It may simply be the cost of a reminder letter after twelve months.

I’d recommend spending at least 70% of your marketing budget on marketing to your existing clients and only 30% on getting new customers. This shift alone will cause exponential growth in your business.

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Over the past few posts we’ve seen how important it is to ‘track your numbers’. What this means in practice is that there is certain information that you really must know if you want your business to improve. Remember, “everything measured improves.”

Now here’s three numbers that you really should be tracking:

  1. No of enquiries
  2. No of enquiries that become jobs (conversion rate)
  3. Average value of each client

Improving just these three numbers can result in dramatic exponential growth for a business. These numbers have to be seen to be believed.

Let’s say you have 500 enquiries each year and 300 of them become paying clients. That’s a conversion rate of 60% or six in ten. Not bad!

Now if the average job is say £200, that means gross sales for the year of 300 clients x £200 job average = £60,000.

Now, let’s see how we can increase all three of these numbers and the difference it will make on gross sales.

How can we increase enquiries? Perhaps by improving the effectiveness of our adverts or flyers or even by setting up referral systems so that our existing happy clients tell their friends. If we get enquiries up from 500 to 600 per year (20% increase) and conversion rate and job average remain the same, that means that number of jobs now becomes 360 (600 enquiries x 60%). At the same average job value of £200 our sales now increase to £72,000. An increase of £12,000, most of it clear profit.

What about if we increase our conversion rate only? Perhaps we can do this by not giving quotes over the phone and having a systemised structured selling process so that more prospects say ‘Yes’. If we increase our conversion rate by 20%, now we have 500 prospects but now a conversion rate of 72% resulting in 360 paying clients (500 clients x 72%). If the job average remains the same at £200, this will give us gross sales of £72,000 also (360 clients x £200).

Now what if we increase our average job ticket only? This could be achieved by offering protector on every job or offering clients the opportunity to add a room of cleaning on once we’re on the job. Let’s say that the average client now spends 20% more with us. Now the average job value is £240 instead of £200. If our number of enquiries stays the same at 500 per year and the conversion rate stays the same at 60% our gross sales will be 500 enquiries x 60% conversion = 300 paying clients at a job average of £240 which comes to £72,000 (300 clients x £240).

So there’s three ways to increase gross sales.

But what happens if we increase all three by 20% by doing all of the above? Here’s where it gets really interesting.

Now we have 600 enquiries per year and convert 72% of them to paying clients. If our new job average is £240 our new gross sales will be 600 enquiries x 72% converted to paying clients, giving us 432 new clients at a job average of £240 giving us gross sales of £103,680! That’s an increase of 72.8%!

Can you see the effect of ‘knowing your numbers’ now?

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Hopefully you’ve come to realise that systems in your business reduce stress, allow you to work less, take more time off without worrying that you have to be ‘on call’ every minute of the day, and also creates happier, more productive employees. And customers are happy because they get a predictable experience.

If you are unable to work, having written systems can allow someone to simply ‘take your place’ with minimum training. Now you can finally get ‘off the truck’. If you want to hire someone to answer the phone, simply hand them your Operations Manual and watch them begin immediately.

And remember, as owners we have not one job but three:

  1. A Marketing Business with the purpose of lining up new business
  2. A Service Delivery Business which job is to deliver world class service
  3. A Client Retention Business to keep the clients we already have.

And you’ll recall, with all our ‘hats’ to wear, many small business owners are simply ‘burned out.’

The answer could be – hire an employee!

As I write this, I’ve just returned from a holiday in Morocco. Because of systemising my business, it has kept running without me. I’ve had an employee answering the phone and booking in work while I’ve been lying around beside a pool in the sun.

Now, ‘parenting employees’ is the most difficult thing I’ve ever done, but having a technician and having the business on ‘autopilot’ is the best way to be. The problem is... how exactly do you find a suitable employee?

First, let me tell you about my previous experience of trying to recruit. The difficulty we face is that there is no perceived glamour in cleaning carpets and upholstery. In fact, people can be a little embarrassed to tell their friends that they are just a cleaner.

That means that most people who apply for your vacancy will be totally unsuitable. They may be able to clean, but our job involves much more than that. It includes for example: being smart and ‘personable’ so that clients feel happy with us in their homes (and remember, we go into private places where no-one else is invited), being able to converse with clients; being able to upsell without a hard sell; being able to explain why they should have carpet protector and the benefits of regular cleaning and so on.

I’ve previously used the Job Centre and others to try to hire. In my view this is a huge mistake and will result in a large quantity of unsuitable prospects. Why? I’ve found that the Job Centre’s priorities are totally different from mine. I want a top-quality technician... they want to get someone off of the unemployed list. That’s why they’ve sent me amongst others, a man totally covered in paint (presumably he was in the middle of a job!) and plenty of others who told me exactly how to clean carpets and swore at me whilst doing so. I’m guessing they’ll be using bad language with my clients too.

So, here’s the easiest way I’ve found to hire a suitable employee without spending hours filtering out all the non-starters. It really is quite ingenious!

Run a small classified ad in the local paper. Direct all applicants to a recorded message that explains exactly the type of person you are looking for. (There are now many telecoms companies in the UK that can provide this at a cost of around £50 including a freephone number). This message can be quite detailed and will cost considerably less than explaining it all in an advert in the paper. Then invite applicants to leave a message explaining exactly why you should hire them. This way, you can hear what they sound like and you don’t have to spend hours on the phone while they interview you for the job. You can tell straightaway whether or not they sound like they can communicate well with your clients. If they sound good, phone them back and get them to fill in a Job Application Form. You’ve immediately filtered out most, if not all of the time wasters. It’s that easy.

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Knowing my ‘numbers’ means I’m never an advertising victim. Whenever an advertising rep phones me with a special offer in the newspaper or wherever, I’m able to look at my numbers and forecast whether the rep is telling the truth or not. (“you mean....advertising reps tell lies?”)

Especially when he tells me that other businesses are getting so many enquiries from advertising with them.

Since then, I’ve had a visit from an advertising rep for the local newspaper. I have a fairly good relationship with him and I’ll occasionally book late space in the paper.

I’d run a couple of advertorials (ie: adverts dressed up as editorial) in his paper and had only just been able to evaluate the response when he called. My ‘numbers’ showed that the ads weren’t working very well at all, even though my gut feeling was that they were.

Now, my philosophy is that if an advert breaks even, I’ll keep running it as long as it brings me a qualified client. That’s because I’ll make a profit on the back-end, when they use me again in a year or two. Plus they’ll refer me to other clients just like them so these new referred clients really cost me nothing to acquire.

I explained this to him, and not surprisingly he had some very persuasive arguments. Persuasive that is, unless you have tracked your numbers. After all, his job is to sell advertising space...not to get my business more sales.

He told me that other local businesses would not dream of not advertising with his paper because their response was so good. I asked him the all-important question...”How do they know?” There was no way of tracking the adverts.. no coupons or offers. So as usual it was a gut feeling by the business owner.

After about 30 minutes of the usual nonsense (“your logo needs to be bigger…you need to advertise 7, 15, 20 times before someone responds”), he could see that the situation was hopeless and left. I must admit that at times during his presentation, I did feel like I wanted to run a series of adverts in his paper again because I desperately wanted it to work. I also felt like simply giving into his persuasive arguments because I didn’t like the thought of disagreeing with him...but the all-important numbers simply did not add up. The response was clear in black and white. Did the advert produce a profit or did it not? And that’s really all I’m concerned with.

I had another experience recently that shows the value of having systems. My technician had booked a day off and two of my friends wanted carpets cleaned on the same day. I didn’t want to let them down so I had no choice but to go to work. Now, I’ve not cleaned carpets myself for quite some time. Instead I prefer to just ‘manage’ the business part-time.

After working hard from 9am to 3pm, I was absolutely shattered. I then had some phone calls to return as well as make sure the van, the paperwork and checklists were all in order for the next days work. I really don’t think I could go back to doing it all myself. I’m so glad I have systemised my business and have a technician to do all the work for me. Now, ‘parenting employees’ is the most difficult thing I’ve ever done, but this experience proves to me that having a technician and having the business on ‘autopilot’ is the best way to be.

Next time, I’ll share with you the easiest way I’ve found to hire a suitable employee without spending hours filtering out all the non-starters. It really is quite ingenious!

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Over the past few posts we’ve seen that we have not one business but three:

  1. A Marketing Business with the purpose of lining up new business
  2. A Service Delivery Business which job is to deliver world class service
  3. A Client Retention Business to keep the clients we already have.

Once we’ve started to put systems into our business, how do we know if they are effective? The answer is to monitor exactly what’s happening and see if it’s working.

This time I’m going to look at tracking our advertising and marketing so we know if we’re wasting our money or not.

There is a saying that “Everything measured improves.”

I’ve often asked carpets cleaners about their response to advertising, such as Yellow Pages for example. They respond by telling me “Yellow Pages works really well for me. We get a lot of work from it.”

Then I ask them “exactly how much work?”

In most cases they don’t know because they do not track where their enquiries come from. So at best, they only have a gut feeling that their advertising is working. But oftentimes it is not.

I’ve often thought that a particular marketing campaign has worked well, but when I look at the ‘numbers’, that is the numbers of enquiries or jobs that it has produced, it’s quite the opposite!

Now I track everything that is useful...the number of enquiries from a given advert, the cost of acquiring a new client, how much it costs to get the job from each advert and so on. It’s given me quite an insight into what’s really going on in my business.

And this way, I’m never an advertising victim.

Whenever an advertising rep phones me with a special offer in the newspaper or wherever, I’m able to look at my numbers and forecast whether or not the rep is telling the truth. Especially when he tells me that other businesses are getting so many enquiries for work from advertising with them.

A few years ago a local directory rep told me casually that one of my competitors was getting a ridiculously high number of enquiries from advertising in his directory. Because I knew exactly how many enquiries I had the year before, I was not swayed by this nonsense. It was clearly untrue because the ‘numbers’ simply did not add up. My competitor should either have retired by now or he should have had a fleet of vans on the road just to cope with demand from this one source. Neither in fact was true. Hence, I saved myself several hundred’s of pounds by not being an advertising victim.

So what numbers do I track?

One thing is Return on Investment (ROI). My goal when I advertise is to get a new client for free. Did you not realise that new clients cost money? In fact, getting a new client is one of the most expensive things you will do in business.

For example if you run an advert in the local paper and it cost you £400 and you get 10 jobs, each new client has cost you £40 to get. For Yellow Pages, the numbers can be much higher. A few years ago, it was costing me £54 to get each new client from Yellow Pages. I’ve now got that down to well under £20. Many business owners do not even think about this! Now armed with this information I know a number of things: Firstly, if I was charging less than £54 plus expenses to clean their carpets I’m slowly going broke unless I can get more money on the back-end i.e. repeat work and referrals.

And secondly, I am now able to ask the question “can I get the same clients cheaper using different media or methods?” For instance, I could have paid a salesman £40 for each new client and it would have been cheaper than what I was currently doing.

This is just one example of how ‘knowing your numbers’ is critical if you don’t want to waste money on advertising. And if you want to improve its effectiveness.

Next time: What other ‘numbers’ you need to know so you can systemise your marketing business.

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So far we’ve seen that the only way for our business not to consume our life is to have it systemized in each of the three businesses that we all have: our Marketing Business, our Service Delivery Business, and our Client Retention Business. And it’s as simple as having all the things that we do written down and done that way every time.

I gave an example last time of how I’ve done that in my own business. I mentioned that when I first hired a technician I was worried that my clients would only want me to do the work. So I prepared them for my employee turning up for the job instead of me with a little script that worked very well including the casual manner of how it was said, noting the response from the client and adjusting accordingly.

Or as William Shakespeare put it...

“All the world's a stage,

And all the men and women merely players:

They have their exits and their entrances;

And one man in his time plays many parts...”

‘As You Like It’

In other words... it was a little act. And that’s how we view our business. When we go to work we are actors acting out our business script. “This is how it’s done here...” We are always in control of situations even if it appears that we may not be. Just as an actor on stage is always in control and knows what he is doing.

All our interactions with prospects and clients are written down in our Operations Manual and we are always in control even if it appears that we aren’t. It’s all an act!

So when prospects phone us to ask “How much do you charge?” we have a scripted reply. We don’t just wing it. Even the way, that is, the manner of how we answer is documented. It’s a system and it works.

So how do you answer that question when a prospect phones...”Can you give me a price for cleaning our carpets?”

Our answer is always “No.” Well not quite like that. Here’s what we do and it’s written down on a script form. Our target market is high-end residential who can pay our prices for high quality work. We are not interested in price shoppers or tenants wanting their deposit back...so we have a script so that we don’t waste our valuable time with them.

Our system is very simple: we try to disqualify them!

In other words, we ask them questions to make them jump through a few hoops to prove that ‘we are made for each other’. And we tell them why we are asking these questions. We don’t want to waste each others time. Every week we turn away many phone enquirers because we tell them that “we are not the company for them.” After all, there’s no point in walking into a BMW dealer with £5000 to buy a brand new 3-series. We will just be wasting each others time.

In fact, I find this failure to target a market (high end residential, budget or whatever) and stick to it, one of the biggest time wasters that most carpet cleaners make. Our systemized scripts mean it’s not a problem for us.

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Last time we saw that putting systems into our business is an investment. It allows us as owners to work less, take more time off and makes sure that the business does not consume our life. After all, we didn’t start our own business to work ourselves to death with no social life.

So how do we systemize and what exactly should we systemize?

It’s very simple. Write down everything you do...as you do it, in each of the three businesses I mentioned last month: Your Marketing Business; Your Service Delivery Business; Your Client Retention Business. And add a Tracking Business to the list so that you know exactly what can be improved in your business. Sure, it’ll take time at first but once it’s done…that’s it!

Imagine that you are going to ‘franchise’ your business and that it will be a model for other franchisees. You want them to do things EXACTLY the way you do them. This could take several weeks to do but the important thing is to get started and actually do it. Write down instructions for doing everything so that even a 16 year old could follow them clearly with no confusion.

I personally like using checklists. It is then very easy to see all the steps to getting a job done. My technician uses one so that nothing is missed out on the job. It’s surprising how often employees will find shortcuts if you allow them to (eg “the carpet didn’t look as though it needed vacuuming, so I didn’t do it!”). There should never be any discussion about what to wear, how to act with clients or how the job is carried out. It should all be written down in your Operations Manual, which tells everyone “this is how we do it here”. This way we are not continually “reinventing the wheel” everytime we have a problem. We know exactly how to deal with it. If we have a new question about how to do something, we want to write down a procedure and put it in place only once. And be sure to follow it yourself.

Of course, nothing stays the same. It may be that you find a better way of doing the job or a better way of answering the telephone. Part of the system should be “This is how we change it here” and this should also be written down in your Operations Manual, otherwise your systems won’t be recognisable in a few months time.

Here’s an example of a simple system: Virtually all of our work is residential carpet cleaning. When I first took on a technician I was worried that my clients would only want me to do their work. After all, many service businesses depend largely on the personality of the owner. So here’s the very simple system I put in place. After I booked in the job, I casually said “On that date, you’ll either get me or (my technician)” and waited for their reaction. If anyone objected, I was prepared to explain that my technician was very personable and fully trained to do the work the same as I would. The truth is that only one person has ever cared that I wasn’t coming! The system has worked and has freed me to get “off the truck”. The important thing is that this was a system…even the casual manner of what I said. This was “how I did it here” at the time, every time. And it worked very well.

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Why should every business, yes even owner operators put ‘systems’ in their carpet cleaning business?

The simple answer is that systems reduce stress, allow the owners to work less, take more time off without worrying that they have to be ‘on call’ every minute of the day, and also creates happier, more productive employees. And customers are happy because they get a predictable experience.

If you’re an owner operator and are unable to work, having a written system can allow someone to simply ‘take your place’ with minimum training. Now you can finally get ‘off the truck’. If you want to hire someone to answer the phone, simply hand them your Operations Manual and watch them begin immediately.

The only downside is that they take time to set up, but once done…that’s it. Just a few adjustments every now and then and the system runs the business like clockwork. After all, if McDonalds can have their restaurants efficiently run by 16 and 17 year olds then surely we can do it too.

So what is so difficult about running a small business? If we previously worked for an employer it looked so easy. Now we realise that we don’t have one job…we in fact have THREE:

  1. A Marketing Business with the purpose of lining up new business
  2. A Service Delivery Business which job is to deliver world class service
  3. A Client Retention Business to keep the clients we already have.

Suddenly the fledgling business that we were once so excited about becomes a harder taskmaster than the boss we had before. The freedom we expected is simply not there. There is always so much to do. Michael Gerber in The e-Myth calls this ‘The Tyranny of Routine’. Customers become a problem. If they buy, we have to go to work and struggle with more and more responsibilities. That’s why so many small business owners are simply ‘burned out’

Over the past few years, I have been ruthless in finding time to put systems into my own business. Previously I had 3 vans cleaning carpets along with Fire & Flood Restoration. I would work all day, come home to answer phone enquiries, then give quotes in the evening. I’d work most Bank Holidays and prided myself on having the phones answered virtually 24 hours a day. I’d be lucky to take 2 weeks holiday a year. And then I’d phone the office every day…just to be sure.

Now I’m able to take four weeks holiday every year (abroad), I’m not continually ‘putting out fires’ and my business no longer consumes my life. And I take a sizeable sum out of the business for what is effectively ‘part-time’ work. All because of finding the time to ‘systemize’. In other words, creating systems is an investment!

So how’s it done?

First we need to recognize the purpose of our business…to fund our ideal lifestyle. And the purpose of a system?  - to free us to do the things we want to do. We’ve all heard that we need to ‘work on our business, not in it’. And that’s the difference…to have a strategic overall view of where we want the business to end up not a tactical view of just doing the work. The problem is not that small business owners don’t work…it’s just that we do the WRONG work. The result is chaos and stress. We need a predictable way to produce results. In other words…a system.

So how do we systemise and what exactly should we systemise?

See Part Two next time