As small businesses get ready for the final quarter of the year, it’s a good time to reflect on some best practices for growth. We are beginning to see signs that the economy may slow down, which makes having a handle on all your growth levers all the more important.
Small businesses can also be trying to go in too many directions all at the same time. Instead focus your efforts to conquer the most important. “The more you can concentrate your efforts and resources on the key, biggest levers, the more impact,” said Hans Hickler, CEO of Ellipses Advisors in Miami.
Let’s hear more from him and other business strategy experts. We will also offer suggestions for further reading on GrowBiz.
FOCUS ON CUSTOMER RETENTION
Adam Snitzer reminds us that it is much cheaper to retain a customer than it is to find a new customer. Snitzer is a revenue strategy expert and president of Peak Revenue Performance, a South Florida consulting firm that specializes in helping companies attract more, high-paying customers.
Based on his experience, it takes 12 times more marketing dollars to sell to a brand-new customer than to entice an existing customer to buy again, he said in a recent Miami Herald column.
The typical business loses roughly 20 to 30 percent of its customers annually, he said. “Imagine two business, one retains 90 percent of its customers, and other keeps 80 percent. If both add new customers at the rate of 20 percent per year, the first will have a 10 percent growth in customers per year, the other will have no growth. Seven years later, the first firm will have doubled its revenues and probably tripled its profits. The second will have struggled to merely tread water. It’s no surprise, then, that investing in customer retention is the single biggest driver of revenue growth.”
It’s so important to large consumer brands that they are even starting to hire “retention marketers” or “retention specialists.” But businesses of all sizes can put a larger emphasis on retaining their customers.
TREAT YOUR PEOPLE WELL
While retaining customers is important, so is retaining valued employees. A new report released from Goldman Sachs 10,000 Small Businesses, developed in partnership with Babson College, found that the No. 1 challenge for small businesses is hiring and retention. More than three-quarters of survey respondents reported difficulty in attracting, hiring and retaining employees. When reviewing candidates, respondents prioritized attributes like a positive attitude, willingness to learn and integrity over work experience and education.
This finding wouldn’t surprise Hickler, who advises and coaches executives and entrepreneurs of startups and small businesses.
It really is all about your people. Take care of your employees. Get to know them and care about their interests and ambitions, said Hickler. “It’s the little things that make the biggest impact on your people feeling valued. Send a note home to the spouse letting them know how much their spouse contributes to the organization.”
Find ways to motivate them. “Often as leaders we can give an employee a chance to do something beyond their comfort zone -.to them it’s everything.”
And lastly, engage them. “I would walk out on the floor and sit down with frontline folks and tell them what I’m working on, things I’m noodling in my head – it’s something they hadn’t seen before because as leaders we try to put on a front of being in control, that we have everything thought out. That simple act of opening up, of showing vulnerability, means so much,” he continued.
“I believe in get, keep and grow. As leaders we have to put energy in getting the right talent, in keeping the talent and in growing our people. As leaders, we are responsible for delivering results, for the product and service we provide. That only happens when we take on the responsibility of being stewards for our employees,” Hickler said.
DON’T CUT CORNERS IN THESE 5 AREAS
James Cassel, an investment banker and chairman of Cassel Salpeter & Co,, says there are areas where you shouldn’t cut corners. They are: marketing, customer service, employee benefits, cybersecurity and nurturing your company’s core DNA.
Like Hickler, Cassel says your employees are one of your most important assets; don’t skimp on employee benefits. He also believes marketing is crucial to keeping a business growing.
“Too often when times get tough, owners make ill-advised cuts to marketing/PR/ad budgets because they don’t understand the importance of these fundamental tools for stabilizing or growing a company. A business’ future viability requires not just cost controls, but revenue enhancement. Ill-advised slashing, or not putting in the time, effort or resources to successfully market your company will slowly deplete your business,” Cassel wrote in a recent Miami Herald column. A recent study found that 50 percent of business owners admit to not having a marketing plan.
In light of the Equifax and Capital One data breaches, another key area not to skimp on is cybersecurity, Cassel said. GrowBiz also explored this topic, and small businesses are targeted more often than you might think and are woefully unprepared.
“Skimping on adequate cybersecurity measures to safeguard your customer data, trade secrets and intellectual property will end up costing you customers, while saddling your outfit with financial liability and huge image problems.”