Well things are about to change. In my book Break the Entrepreneurial Struggle I've developed a 5-Step Process, that if followed by you will result in better quality customers knocking down your business front door.
Step 1. Rank all your existing customers “A to D”
Print a complete list of your entire customer base, and go through it, line-by-line and with a thick red pen and write a letter from A to D beside each customer name. Do not look at the dollar value of what these people spend with you, but rather base it on your “gut feel” and intuition on where you believe they rank from A to D. “A” represents your perfect customer. “D” represents those at the other end of the scale. They are those Value Abusers, people who you wish weren’t your customers. You can’t wait to get rid of them.
In the middle will be those customers who are not as stellar as your “A” Class customers, but they are not as bad as your “D” Class customers either. You must decide where they sit in the middle. Now some “B” Class customers could, with your guidance, get promoted to be “A” Class customers, but you need to work on them. Some will not convert and they may even slide into a lower ranking. From my experience, I did, over time, managed to convert most of my “B” Class customers to “A” Class. Some I couldn’t but I was happy to keep them because they were still good customers and were low maintenance. However, I could never lift the ranking of C & D Class customers. They would never change no matter how much I coached them. They continued to ignore my payment terms, they continued to disrespect my policies and they would never value what I or what my business did for them. Once a Value Abuser, always a Value Abuser.
Step 2. Create a Perfect Customer Profile
Sit down and design a list of attributes, characteristics or traits that you would want to see if your perfect customer walked through your business front-door today. What would they look like, what would they buy from you, how would they treat you, what industry would they be in, what would their attitude be like, would their business be in a growth phase or in a decline phase. Write anything and everything down that would best describe your “perfect customer.”
Within my business, I have developed 21 characteristics that I want to see in my perfect business customer. Now don’t get me wrong, not all prospective customers need to display all 21 characteristics. This will never happen and if you adopt an “accept or reject” customer decision model based purely on someone satisfying all the traits that you have listed, then you will never grow. However, you want to make sure they hit at least the majority of them, and some customer characteristics are more important than others.
What you rank in order of importance of the perfect customer characteristic is your personal choice and your decision. There are no correct answers. You need to look at what you value the most in your perfect customer when they walk in the door. However, a word of advice here; there needs to be qualitative and well as quantitative measures in your Perfect Customer Profile. Just because a customer pays you the most doesn’t mean they are the most valuable. Value comes in many forms. Judge your customer on the overall sum of their parts and then decide if they fit or not within your business.
Step 3. Compare and Remove
Now compare the Perfect Customer Profile you have just created, to your existing list of customers. Decide which of your existing customers fit within your perfect customer profile, these could be A & B customers or just A Class customers only. At this stage you may need to amend the ranking of some of your customers now that you know what your perfect customer looks like.
Next you need to implement a plan and sack all customers who are not “A & B” Class customers. You need to remove your C & D class customers. A word of advice here; do not remove them all at once, you may need to be patient. If you only have a few customers you need to sack, then great, it will not have a major impact on your bottom-line. However if you have a substantial number of customers your need to sack, then progress through this stage very slowly. Make it a gradual process because if you take to your business with a knife, too dramatically, and cut too deeply, you may have no business left. If you have a very “fat” existing customer pyramid, meaning you have a very wide foundation of poor quality customers, then you need to remove and replace them over a period of time otherwise your business will go backwards and could even collapse. If your customer base has been fattened over time because you accepted anyone who walked through your door, then you need to gradually remove each C & D Customer but you may need to replace them with a better quality customer first. So use a “replace then remove” strategy during this phase. When I sacked the “Pallet Man” customer I previous described, it was at a time of my choosing. I couldn’t afford to let go of $25,000 of sales in one hit. So it was only after I had found two better quality customers to replace him did I then sack him. So “replace” first, then “remove” second. In fact, now when I win a new client, one of the first things I say is, “now who can I sack now that I’ve found a better replacement?” It’s a continuous process of upgrading your customer base with better and better quality customers.
There are some customers that you can immediately remove. Sacking them will not create a huge financial impact. However there maybe some customers who represent significant annual sales to your business but they are giving you so much pain and grief that you may decide just to bite the bullet so to speak and end that pain. When the pain and grief gets to a point where it outweighs their monetary worth then you may make the decision to sack them just to free yourself of their burden. Believe me, the joy and sheer relief you feel from sacking some “D” Class customers is great. This was one of the key decisions I first made in those cold dark days in Beenleigh when I first purchased my business. It was a tough decision to make, especially when I had just paid money for the customer base, but I knew I had to cut out the infection first before the business could start to heal. It was and still is today a great feeling for myself. You will feel like a huge weight has been lifted off your chest. So go into work on Monday and sack some customers!
With business owners that I work with today on breaking their Entrepreneurial Struggle, I make it a monthly action item for them to review their customer base and weed out the bad customers. I encourage everyone within the business, from the receptionist through to the directors to decide on which customers to sack. I know it sounds strange, but your staff will see you in a different light. You will earn more respect from them and you will be seen as a leader rather than a follower if you show courage and sack the problematic, value abusing customers in your business. Over time some of them slip back through. This is inevitable, but you need to make a decision now and take these steps to remove and replace the ones you already have.
Step 4. Try to convert B’s to A’s
You may have some customers who are on the cusp on being “A” Class customers. At least give them a chance to convert and upgrade themselves. This might involve you having a private conversation with them about what they need to change within themselves in order for them to be an “A” Class customer. How I do it within my business is that if I feel there is a “B” Class customer that could be a “A” Class customer, I will pull them aside and I will mentor them to be an “A” Class customer. I know this may sound strange, but this is what I do. I tell them that I’m not happy with the fact that they don’t stick to my payment terms or they don’t follow what I’ve told them to do so they can improve their business. Overall I’m happy with the customer but there are one or two characteristics that they display that goes against my Perfect Customer Profile. They may be nice people to deal with. They may buy a lot from me. They might refer other business clients to my business but there could be one niggling trait that they are not quite overcoming. This is no reason to treat them as a C or D customer and sack them.
Step 5. Only focus on gaining and retaining A class quality customers
Once you have completed Steps 1 to 4, you need to roll out and implement a strategy for growth within your business that will only focus on you gaining and retaining “A” Class quality customers. It is a strategy you must implement otherwise you will not grow. Once you have cleared the decks and cleaned out the dead wood, you now must fill up and grow your business with quality customers. Here are some ideas on how to do this:
o Design a marketing strategy tailored to attract your Perfect Customer Profile.
o Actions not words. Go out and actively seek better quality customers.
o Like people tend to associate with like people. Therefore “A” Class quality customers tend to associate with other like-minded “A” Class quality customers. Therefore ask your existing “A” Class customers for referrals of people like themselves.
o Design and implement a Customer Communication Schedule (CCS). A CCS is a formalised, structured communication schedule where you communicate with your best customers, maybe once a week, maybe once a month, either via the phone, email or in person. You need to communicate regularly with all your best customers because I guarantee you when you do, they will appreciate your attention and they will buy more from you. You are missing out on thousands of dollars of revenue simply because, as you have done so in the past, you have spent less time with your “A” Class customers and more time on your Value Abusers. So simply diarise and schedule in when you are going to call all your best customers. I do this on the first day of each month. I reserve a date in my diary and spend the entire day calling my “A” Class customers. When I call them, I ask them how their business is going. I then ask them if I can drop by and see them. Your aim here is not to waste time on idle chit-chat, but to see if there is anything they need from you. You are looking to create a sale by just listening and asking the right questions.
The more regularly you communicate with your best customers by using a CCS, the more attuned you will become to their needs and wants. The more receptive you become to their needs and wants, the better you will be in satisfying their needs and wants by selling them more of your products and services. It is as simple as that. In a world of text messages and emails, we have lost the personal touch of face-to-face, genuine communication with our customers. Make a commitment to be more personal rather than impersonal with your customers and you sales will soar.
If you follow these 5 steps, you will invert your customer pyramid and will be well on the way to Break the Entrepreneurial Struggle.
Come to my workshop: Work On My Business on Tuesday 20th May in Brisbane and you will learn more.