Last month, I highlighted the following top five challenges we faced in our business:
- Cash flow issues/Undercapitalization of your business
- No investment in a proven pipeline for new business
- Shallow dialogue with our clients
- Lack of differentiation in the market place
- Fear or reluctance to take risks or try new things
We discussed item # 1, the challenges we had with cash flow last month. If you missed it, you can read it here. Today, I will focus on how a lack of investment in a proven pipeline for new business impacted our growth.
Most people will agree that without an effective marketing system, your business will stall and eventually die. Often times, we jump into a new business without asking two critical questions:
- How much is a customer worth to my business?
- How do I plan to get new customers?
These are two critical questions that in my opinion should inform your marketing plan and how much you should invest in building a blueprint for generating and tracking new customer leads for your business. I recall we considered the second question when we started our firm but did not really consider the first question. Although we considered question # 2, we did not invest in a system for generating new leads and for tracking conversion of leads to customers. As a result, we did not see the growth we anticipated early on in the business. Below, I have summarized some of the key learning points that you can apply to your business today:
- How much is a customer worth to you? I encourage you to start with this question. Our mistake early on was that we had a short sighted view of what a customer is worth to us as we only focused on the immediate current transaction. However, you should view the worth of your customer over the life span of the relation. For example, if on the average each of your clients pay $1,000 per year for the services you offer and they remain clients for about 10 years, then each client is worth $10,000. Now, you can make a decision on how much you can invest to acquire new clients. Further, you can focus on how to grow this value by offering additional services.
- Customer Lead flow blueprint: Once you know what a customer is worth to you, your next step is to come up with a plan on how to get new customers. A good tool for this is Dan S. Kennedy’s marketing results triangle that looks at your target market (who), message (what) and media (how). If you’re clear on your market, message and media you can spend some time to invest in a proven system for generating new customers. This will include defining a lead flow map for generating new leads, following up and converting the leads to customers. It is important to consider generating leads from multiple sources so that you know which source is the most lucrative for future investment based on the results of your tracking. For our business, we did not have a specific target market when we started but over the years, we’re now intentionally targeting specific markets and we are currently looking at ways to track and monitor new leads using social media, targeted events and newsletters.
- Follow up on leads: Stats show that approximately 80% of new sales come from regularly following up no existing leads. This was absolutely shocking to me. For us, majority of our new customers come from referral and we’ve certainly made the mistake of not consistently following up on these referrals which has resulted in lost business. While we’re now more intentional about it we are still working on streamlining this to ensure that no lead is wasted. So it is important to develop a strategy for regularly staying in touch with your leads through targeted mails, newsletters, events, etc. These leads end up becoming future customers. We have certainly experienced it and you will too.
- Become a student of marketing: One of our biggest mistakes was not learning as much as we could about marketing early on in the business. If you really want to be successful in growing your customer base, it is critical to invest some time and resources here by increasing the pace of reading and education around business and marketing. Investing in solid marketing education (through books, seminars, events and mastermind classes) is the best investment for you personally and for your business. With a solid knowledge of marketing, you can successfully start other businesses in different industries using the same fundamental marketing knowledge and skills you’ve developed.
Next time we will look into another critical area of running your business that most of us ignore – the importance of really staying in touch with your customers through deep dialogue. Stay tuned!
