So, You Want to Go Big Time? – Know Your Customer!

Before making any significant investment, competent business managers thoroughly analyze the opportunity.  They will perform a financial analysis to justify the investment.  The typical analytical model employed is a discounted cash flow analysis.  The two major components of this methodology are the upfront investment and the ongoing cash flow from operations.  The initial investment is straightforward.  It includes the outlay for land, building, furniture, fixtures, and other startup costs to be capitalized.  A cash flow analysis employs the typical expenses incurred in your existing outlets.  The cost of Goods Sold and Labor vary with sales.  Most other expenses are fixed, at least on an annual basis.

Business activity is reflected in revenue.  Revenue is the critical component of cash flow from operations. The business owner must determine the revenue required to achieve the target Return on Investment.   The revenue target is the product of the number of transactions and your average transaction value.  The average transaction value is revenue divided by the number of transactions.  You must know your customer’s behavior to make that forecast.  You must know who they are and why they visit your establishment.  You must know how often they trade with you and how much they spend.  You must know their demographics, i.e., their age and income level.  You must know as much as you can about your customers.  Detailed customer information will help you build a revenue model to complete the cash flow expectation.

Early in my career, I was the Director of Planning and analysis for the Retail Group of a Fortune 500 Conglomerate.  I spent most of my time evaluating investment proposals for prospective new stores.  Later in my career, I became adept at prioritizing markets for expansion.  Every market, (think SMSA) is a collection of trade areas (think neighborhoods).  You determine the viability of a market by researching its trade areas.   Understanding the trade areas means understanding their demographics. The prioritization of potential trade areas is based on the performance of existing outlets in their trade areas.

Once you have established the revenue required to achieve your target ROI you must determine if it is reasonable.  The business owner can confidently move forward if the revenue estimate is reasonable.  If the revenue cannot be justified, further consideration is required.  The data from one point of distribution is not enough.  One needs three to five locations or more to generate reliable data.

How does one validate the revenue required to make an investment work?  Forecasting the exact revenue amount is not realistic, however, one can determine a reasonable range.  One obvious metric is to compare an existing location to the site under consideration.  The comparable location should match the size of the trade area, accessibility to prospective customers, the number of competitors, and the number of prospective customers with the ideal demographic profile, etc.  The revenue generated by the comparable existing location suggests the potential for the site under consideration.  There are other ways to validate the targeted revenue, but this example is instructive.

What do you need to know about your customers?

    • Who are they?  Socio-economic profile
    • Where are they coming from, home, work, other
    • How far do they travel? Time/distance
    • How often do they trade with you?
    • How much do they spend?
    • Age
    • Household income?

The entrepreneur must assemble the customer information required to complete their analysis.  There are many sources to consider data owned by the entrepreneur.  Credit Card vendors can supply some of the data, and some may be acquired by a third-party researcher at a cost.

Begin by collecting your customers’ data from your internal records.  Internal records reveal average transaction value (check average), activity by day, daypart, and month.  Credit card companies can provide aggregated information about consumer demographics and residence.  Third-party marketing researchers can help determine the boundaries of your trade areas.  They do this by plotting the customer’s home and work address.  The point is to know enough to forecast the revenue potential from prospective trade areas.

Finding customer data

    • Customer Surveys
    • Data shared by credit card and other 3rd party vendors
    • Size of trade area by home/workplace, map their address
    • Beware of destination venues for projections

 

SUMMARY AND CONCLUSION

The successful entrepreneur knows his customers.  He continually works to understand their evolving wants and needs. This is fundamental to running a successful business.  Continued success for any size business requires customer knowledge.  This knowledge helps the business owner retain their customers.  New products, services, and programs are based on customer insights. Without a customer insights program, the business owner is on shaky ground.  Without solid customer data, significant growth of the business is not realistic.

Thank you for visiting our blog.

 

Jim Weber – Managing Partner,  ITB Partners

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7 Questions Customers Will Ask About Sustainability

Consumers are at the forefront of the eco-friendly revolution. Multiple studies have revealed what many business owners already know — customers prioritize sustainability. For aspiring entrepreneurs, this means you need to prioritize sustainability, too. You also need to be prepared for the questions that customers might ask about your sustainable business practices. Today, New Century Dynamics Executive Search goes over seven important points that will reveal your business’s commitment to sustainability.

 

  1. “Where is this product sourced from?”

Where a product comes from often determines whether or not it is sustainable. Products that are delivered via long-distance shipping, for example, contribute to carbon emissions. You can avoid this by sourcing products from local suppliers.

 

  1. “How does your business benefit the ecosystem?”

Some customers care about specific elements of sustainability, such as the ecosystem. You can answer this question with marketing materials that highlight how your business practices are benefiting the environment. Be specific when you describe and market these benefits.

 

  1. “Does your business use sustainable products?”

Customers know that sustainability requires a long-term commitment from a business. They want to know that you’re using sustainable products in your daily operations. These products might be pricier than traditional items, but they’re a worthwhile expenditure — and customers will be reassured to know that your business’s commitment to the environment includes sustainable purchasing practices.

 

  1. “How are you reducing paper waste?”

Paper waste is a major cause of pollution, and well-informed customers will want to know that you’re actively fighting this problem. You can address the issue by replacing your paper invoices with electronic invoices. An electronic invoice system will also allow you to create an invoice with a premade template. Simply customize it with your logo and add any text or colors that you’d like.

 

  1. “Was your business founded on sustainable business practices?”

You might be asked whether your company has always maintained sustainable business practices. It’s okay if the answer is no — it’s better to dive in and start your business than it is to waste time and aim for perfection. If you’re ready to get started, establishing an LLC is a great place to start. You can start yours with help from a formation service, and you’ll be able to take advantage of less paperwork and minimized liability. However, not all formation services are the same, so check BestLLCServices.com reviews to make sure you’re getting the best deal available.

 

  1. “How did you learn about sustainable business practices?”

Your successful implementation of sustainable business practices might inspire others to start their own sustainable businesses — and they’ll likely have questions. You can help other entrepreneurs by sharing the resources and research that helped you learn about sustainability.

 

  1. “How do you balance profit with sustainable practices?”

Balancing sustainability and profit is often a concern for new business owners, and customers who are interested in your business model might ask about it. You can tell them that sustainability often helps businesses grow and generate greater revenue.

 

Have Answers Ready and Have a Plan for Sustainability

Building genuine connections with your clientele is the key to ensuring your business’s long-term success. Customers who are invested in your business will want to know more about it, and they may ask any of the aforementioned questions. You can strengthen customer relationships by answering honestly and maintaining sustainable practices such as electronic invoicing.

New Century Dynamics Executive Search is focused on providing Retained Search for the Service Industry: Segments of interest include Food Service Distribution, Restaurant and Hospitality, and Retail. Call 770-354-2817.

Thank you for visiting our blog.

 

Jim Weber, Managing Partner – ITB Partners

Jim Weber – Managing Partner,  ITB Partners

I hope you enjoyed our point of view and would like to receive regular posts directly to your email inbox.  Toward this end, put your contact information on my mailing list.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me, so please leave a comment.

We Fired Our Cleaning Service!

It is not easy to land a new customer. And it takes work to maintain a relationship over time. That is why customer retention is so vital for business continuity.  Given that, it is understandable that I was so baffled by this week’s events. We fired our maid service Thursday. Well, they fired themselves.

Thursday night, my wife began receiving text messages from the maid service owner. Her texts included photos and videos of our home’s interior. She demanded that we pay an additional $45.00, 33% of our regular fee, because they cleaned up a construction area. What incredible hubris. It was a strange situation. Our regular maid had a doctor’s appointment, so they sent a replacement who was unfamiliar with our home. She took the videos while she was working. I have zero tolerance for that kind of behavior from a vendor. Someone taking a video inside our home while conducting a service, in my mind, is grounds for immediate termination. Not only is that an invasion of privacy, but it is also a significant security issue. However, my wife is a bit more polite than I am. She let the vendor make her case.

However, the result was the same as my wife decided to terminate our relationship. The entire conversation and ultimate termination were made entirely by text messaging. Not an ideal situation. Unless the vendor intended to cancel our service, for whatever reason, this should’ve been a voice conversation. Resolving differences via text is seldom a good idea.

Two significant projects are in process on our home, but they had a minor, if any, impact on the maid’s workload. First, we are remodeling our master bathroom. We completed the demo work in that area over three weeks ago. The next phase of that project will begin shortly. The maid did not have to clean that area, nor was it a contributing factor to any additional work. She was not cleaning a construction area.

Secondly, we are refinishing our basement, turning that area into a very spacious apartment. That area is not a part of our cleaning contract. Admittedly, that project kicked up a bit of dust this week as we had to cut concrete to prepare the plumbing for the bathroom. Before the maid arrived, we dusted the house and used the Swifter system on the floors on the main level. The cleaning job was the same as any other visit.

Small businesses are having difficulty with staffing issues that may or may not be related to Covid–19. I get it. Last month we had another service clean our windows, inside and out. The owner of that company did the work himself. He told me that nobody wants to work. Even so, he was pleasant and did a good job. I told him that we would use him again. He certainly did not try to gouge me because our home is an alleged construction site. The issue with our maid service was a different story.

The vendor intended to extract additional funds from us as she believed that our home was involved in extensive renovations. She had asked what we were doing before the maid arrived. My wife explained the situation, and we thought that was the end of the discussion. Then the text messaging began Thursday evening. Whatever trust we had with this vendor was destroyed in a few short minutes. Friday morning, we received another text from the vendor. She apologized for doubting our situation and asked that we continue using her service. My wife decided not to respond immediately. She wanted to sleep on it.

I view the vendor’s behavior as a case study in poor account management. If she had legitimate concerns that our expectations were beyond the scope of the agreement, she should have requested a meeting in our home. She would have gained first-hand information about the situation. We would welcome that approach. But that is not the way she proceeded, far from it.

Customers, particularly long-standing customers, are an asset to be protected. You don’t want to lose one needlessly. If you have a dispute or a disagreement, ensure that you work towards a resolution thoughtfully and professionally. This situation was not a big deal in the grand scheme of things, but we will remember it.

Thank you for visiting our blog.

 

Jim Weber, Managing Partner – ITB Partners

Jim Weber – Managing Partner,  ITB Partners

I hope you enjoyed our point of view and would like to receive regular posts directly to your email inbox.  Toward this end, put your contact information on my mailing list.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so; please leave a comment.

 

 

On Customer Loyalty and Retention

Mark Fonseca of Pragmetrix Group, leads a discussion on his company’s methodology for the assessment of Customer Loyalty to help their clients develop more effective Customer Retention Programs.  To see this presentation click here.

Mark Fonseca has over 20 years of experience in consultative sales, sales management, and client relations. As a top producer at Lanier Business Products, he sold document management solutions to a range of businesses and was prolific at establishing long-term relationships.
Mark consults one on one with the most successful CEOs and Executives in Atlanta and has interviewed thousands of Executives and Business Professionals. He has experience in Sales, Sales Management, and Sales Training Best Practices. Currently, Mark is the owner of his own private men’s custom clothing and executive image consulting business. He has developed strong business relationships with heads of state, CEOs, top-level executives, and successful entrepreneurs, through one-to-one consulting and exceptional customer service.

As a Partner in Pragmetrix, Mark is responsible for Client Relations, Business Development, and conducting interviews within the Pragmetrix Customer Loyalty Assessment process.

Why Pragmetrix Group? – Insights from our Customer Assessment Process

 We offer you:

    • Overall Customer Net Promoter Score
    • NPS Promoter, Passive, and Detractor Segmented Dashboards
    • Unedited Customer Insights Assessment Transcripts
    • S.W.O.T Analysis Based on the Voice of Your Customer
    • Growth Opportunities Based on the Voice of Your Customer

What Our Customers Are Saying

“With the words of your customers as their foundation, they extract the issues that your business needs to focus on, so that your customers become promoters, and by extension, you sell more. They were responsive, creative, and the work product is superb. The best money you will ever spend at your company, period!”

Stephen Newell
CEO
Mission Mobility

 

Mark Fonseca, PARTNER
Pragmetrix Group
mark@pragmetrix.com
(404) 983 – 4121