What does freedom mean to business people?

When you ask business owners why they started their company, you frequently hear these words: Freedom and opportunity.

Opportunity tends to have a narrow definition. Someone sees potential in a market and goes after it. Opportunity may also mean the ability to make more than they could make at a job.

Freedom’s meaning seems to vary a bit more from owner to owner, at least as it relates to “I started my business because I wanted more freedom“. Knowing exactly what it means to you is critical. Those specifics will impact on how your company takes shape, how it’s run and eventually, how it appears to potential buyers.

I bring this up because I’ve recently been in a number of conversations with owners who are planning or considering the sale of their business. Some haven’t made the “I want to sell” decision yet. Those who haven’t decided yet are still  focused on improving their business practices. These changes will make their businesses more attractive to potential buyers if and when that time comes.

Working toward a better freedom

When discussing what needs to be done to sell your company, there’s usually a long list of things that the owner wants to improve before looking for buyers. Since your company will benefit from a subset of these improvements even if you don’t sell the company, be sure to focus on those things first.

Why?

First – Anything that makes the company better also improves it for you between now and the time you do close a deal. If you never close a deal, you still benefit.

Second – Some of the things you’d to prepare will only benefit you in situations where an “investor-class” buyer is involved, such as a private equity group.

Selling your business to “someone in your town” is much different than selling it to investors. The more sophisticated the buyer, the more complicated, annoying, and costly the due diligence process will be. Be sure that the prospect is dead serious before venturing into this process because it won’t be fun, cheap or easy – and it’s possible their intentions won’t be honorable. Doing your homework is essential.

How does this relate to freedom? The improvements you make should improve the freedom your business provides – and these things are almost always the same things that make the business more attractive to buyers.

What does freedom mean to you?

Specifically, what freedom does your business provide – or what freedom do you want it to provide?

Whether you are looking at what happens after you sell your business, or simply what will happen once your business reaches the point of being able to support you – it’s critical that you know exactly where you want it to take you.

Does freedom mean more time? What’s that mean for you?

Working fewer hours than at your last job? Working at home vs. having to commute? Being home every weekend? Not having to travel 25-30 weeks per year? Having the ability to come and go at will? Having a more flexible schedule day to day than at your last 8-5 job?

Businesses that provide time freedom typically have a team doing the day to day work. At first, the owner might be managing the team. Over time, owners need to recruit and/or develop someone to manage their team.

Companies structured like this can be easier to sell because they aren’t as dependent on the owner to run them day to day, much less to create revenue. They also provide smoother continuity if the owner dies or is disabled.

Does freedom mean more money? What’s that mean for you?

Does it mean that your income is more secure? More resilient? More diverse? Less likely to be at the whim of someone else?

What aspects of the business protect that income, your pipeline, etc? How resilient is that income if you have to interrupt your work (as owner) to care for a family member for more than a day or two?

Companies where income freedom is more important than time freedom can be harder to sell if the owner is critical to day to day operations.

Either way, the important thing is knowing what you want & structuring your business to support that over the long term.

Photo by USAG-Humphreys

Quality management’s slow ROI

We talk about numbers, metrics, & dashboards from time to time. One of the more difficult things to measure, much less manage, is quality.

Is there a single measure?

Some might suggest Net Promoter Score as an ideal single measure. NPS ranges from -100 to 100. It represents the willingness of a company’s customers to recommend their products & services to others.

If your business makes / sells cars, what single measure indicates your overall quality? Number of recalls per model year? Number of cars returned under lemon laws? Annual average cost of warranty repairs? Repeat sales?

Quality management is difficult

What makes it so hard to manage & measure quality?

Cost: Quality management systems are expensive, at least they feel that way. If you manufacture things (including software), the investment necessary to measure & report quality can easily approach the cost of producing the product. Finding the ROI is difficult at best, while the price sticks out of your P&L like an ingrown toenail.

Time: Quality control isn’t easy, fast, or simple. Measuring & reporting quality either during or immediately after the manufacturing process is a complex, incrementally-built thing. It takes time to build. If your team’s culture is focused on speed above all else, quality management may not make your “projects to implement” list.

Quarterly expectations: Time-to-return-on-investment compounds the difficulty. Quality control feels like an expensive, plodding animal, making it easy to view as an extravagance rather than an investment.

Accountability: Quality measurement can feel like blame creation, rather than data collection. Accountability must extend beyond the head/hands of the worker to the team’s management, systems, and to the training & tools provided to that worker. Quality work is accountable by design, and rarely happens by accident. It’s resilient, running for days or weeks at a time without stopping. It’s ready for the edge cases that try to inject chaos into your customers’ world. Customers appreciate when the products they buy can take a punch.

Culture: Quality isn’t a job. It’s a value. If your team sees it as an incumbent part of their job, it will change their work, how they work, & how they think about their work. If someone doesn’t see quality as part of their job, they may need training. If training fails, they may fit in better elsewhere. People who value quality don’t want to work with those who don’t value it. Who would you rather lose?

Every job is a quality job

Years ago, a leadership instructor moped into the room after a break & started droning on in monotone. He sounded like he was having the worst day of his life. After a few minutes, he took a break. When he returned, his mood was positive & very happy to be there – despite being in the same room with the same people.

He stopped for a minute & asked if anyone wanted the old, depressing guy to return. No one did. His lesson from that little act was that “Every job is a sales job.” If you’ve ever been “greeted” by a sullen receptionist, the meaning of “every job is a sales job” is obvious.

The point? Every job is also a quality management job.

Like the sullen receptionist, it only takes one person, event or action to make us forget the good work a business has done. Similarly, when one department’s role in quality management fails, it devalues the work of the rest of the company.

Quality management systems help us monitor & correct these things before they cause reputation damage.

Forests, forest fires, and reputation

In a world dominated by short term views, quality management’s slow ROI & difficult to identify returns seem too expensive & time-consuming to invest in. Even for those who invest, a ROI search in their accounting system comes up empty.

As a result, a bad financial period makes it easy to cut what seems like an extravagance that isn’t contributing to the bottom line.

Think twice.

Quality & reputation can be both sturdy & fragile, like a forest. It takes decades to grow a healthy forest. Reputations grow similarly.

Like a random lightning strike, a carelessly discarded cigarette butt, or an abandoned campfire can destroy a decades-old forest in hours, a change in quality that goes undetected can cause reputation damage that takes months or years to recover.

Does your business have months or years of staying power? In a pinch, you can borrow to bridge a short-term cash flow gap.

You can’t borrow reputation.

Went to the gym once. Didn’t work.

You’ve probably heard about things that didn’t work in someone else’s business. The story probably included an assertion that whatever isn’t working for someone else also wouldn’t so won’t work in yours. The tool itself is generally irrelevant. More often than not, the problem is a lack of consistency.

Execution isn’t easy. We do the wrong things. We do the right things at the wrong time. We fail to prioritize, or prioritize poorly – often doing the urgent rather than than the important. Each of those things have their own solution, tactic, or cure. The challenge is executing every day, every hour, every appointment – as appropriate for the solution, tactic, or cure. To be as effective and efficient as possible, all of these things require consistent execution.

We all have a ton of things to do. It takes a systematic intent to consistently eliminate tasks of no / low value, making room for the high value work our peers and customers need most.

Consistency gives

Consistency has a number of benefits. If you are consistently good, people will depend on you / your company – and soon get to the point where their expectations are that you will always do, say, and deliver what they expect. This clientele will tell people. Some of them, the most rabid types, will tell lots of people. A small percentage of them will practically take it as an insult if one of their friends or colleagues don’t use their consistent vendor.

Consistency gives your clients something steady to latch onto at a time when many of them feel there is little they can depend on other than themselves. Outside of your spouse and perhaps a few others, do you have a vendor you can depend on no matter what? One that you would bet your business on? Think about the peace of mind that would give you if you had that kind of vendor (or vendors) in place.

Consistency is a quality you can sell, price higher, and use as leverage when competing for a new customer. Anyone can make a single sale. Consistent vendors make that sale while claiming an asset – a new, long term customer.

Consistency takes

Do you have vendors or places you do business with as a consumer where you always have to remind about delivery or deadlines? Do you frequently have to correct a vendor’s work or invoices / paperwork? Do their work habits force you to be the one who must consistently follow up about promises, on-time delivery, service windows, quality and completeness? Is that the exception or the rule?

How does that make you feel? What’s it feel like the next time you have to purchase or get service from a vendor like that? Do you dread it?

Are you repeatedly changing vendors in an attempt to find one that you can consistently depend on? How does that feel?

Does your business track churn?

Churn happens when a business gets X new customers and loses Y customers each month. If you have to track it, you’ve probably got a churn problem. Maybe it reflects the direction and growth of your MRR (monthly recurring revenue) due to your business model.

Churn happens because customers cannot depend upon multiple vendors in your market. Yes, others are part of this as well, otherwise new customers wouldn’t be filling YOUR bucket that’s also leaking customers every month. Some may be new to the market, but a reasonable percentage of those new customers are coming from other vendors who aren’t taking good care of them. How long will you keep them? Consistency is a factor.

If you ever ask a former customer who churned away from you, they will almost always say they left because of price. Price is an easy excuse to use and it’s one they know you will be least likely to argue about. However, churn is rarely about price. More often than not, it’s the last straw after a customer has lost patience in the consistency of your product / service quality. First they get frustrated, then the investment seems like a waste, and finally, they’ve had enough.

No one gets into business to intentionally be bad at something. It takes effort. Wasted motion. Lost focus. Lack of intent.

Process by process, employee by employee, consistent execution improves quality. Going to the gym once doesn’t produce ideal results. Neither does inconsistent execution.Photo by Dan Harrelson

Are you using comfortable tools?

Almost all work teams use tools. Sometimes these tools change over time, sometimes they don’t. Some tools have a long history and rarely change from their original form – other than perhaps the materials they’re made of. The pocket knife is a good example. While it was once wood, bone or stone, over centuries it evolved to steel and other metals. Today, you can buy a pocket knife in almost any form you want. If you have the right tools, you could make the knife yourself.

Comfortable tools, comfortable shoes

We can get so comfortable with a favorite tool that we don’t consider the use of alternatives. In some cases, we might be blind to alternatives or improvements. Either we don’t realize that everyone who generally does what we do has moved on to new, better, safer, or more productive tools, or we aren’t paying much attention to changes in our industry.

Tools become like comfortable shoes or a car that we’ve owned for a long time. They fit just right. They don’t give us blisters (real or mental). We become so adept at using them to perform our work that they become a part of us. We can use them to perform a task and find ourselves done with the task and realize that we performed the task without really thinking about it. At that point, work becomes much like muscle memory. We can do it inattentively or without focused thought.

While this sort of comfort and familiarity is a good thing, we need to be careful not to let ourselves be lulled into complacency.

Are your tools state of the art, or close?

When we don’t get outside of our comfort zone on tools – and this could be tools of any kind – things can happen to our work and our output that we never saw coming. If you still use a claw hammer for every nail you drive, the houses you build will be as sturdy as those built by someone with a modern tool like the pneumatic nail gun. The problem you might run into is your level of productivity would be the close to what it was 40 years ago. That might seem ok until your ability to complete a structure in a particular time frame is compared to builders who use nail guns.

The nail gun is an example and these issues aren’t limited to any single trade, skill, or career. Even if you love your industry’s equivalent of the claw hammer, it’s worth taking time to review the alternatives that have sprouted in the last year. Some industries experience tool changes quite frequently. In particular, software changes in many industries, but there are many other changes that occur frequently that you may not want to (or need to) switch to. Even so, stay aware of them.

Flavor of the month

Tools in some industries change so frequently that keeping up with them can put a serious dent in productivity. Thrashing around because you’re constantly changing to the “flavor of the month” tool-wise adds hidden burdens to your productivity and costs to the bottom line. This is one of those areas where you see software changes creating problems. This isn’t as much about the software industry as it is about the industry where the tools are used. The software business has plenty of challenges with flavor of the month technologies – but they aren’t alone.

If you feel like you are repeatedly tempted by the “bright, shiny object” tool-wise, stop to reflect a bit on what’s creating the desire to switch to another tool. Is it desire or need? Marketing tools frequently fall into this category, while proven, productive activities such as the manual labor of following up after a sales call are neglected.

Tool changes are often positioned as eliminating the need for a skilled craftsman (regardless of gender), or eliminating the need for a tool user with substantial training and experience. Safety is often a prime component in the introduction of newer tools. None of these things replace training, skill, and experience with a tool. Even with 3-D printing and similar technologies, there’s skill, experience and training at some point in the process.

Build a process with your team that evaluates new tools and gets people to stretch their comfort zone beyond the tools they’re familiar with. This tempers “random” tool changes & allows both experienced & novice staff to offer input & learn the business process for evaluating tools.

Photo by moonrat42

The ingredients of effective criticism

Today we’re going to use a common political event (and some football) to discuss the effective delivery of criticism.

Recently a new candidate joined a local political race. The new candidate’s campaign has spent plenty of time pointing out things that are broke, need attention, or didn’t go well. That doesn’t mean the candidate has nothing to say, nor that they have nothing valuable to add to the conversation about how their community is run. Even so, this “list” dominates their campaign while offering no specifics about their qualifications for office.

Criticism is not a qualifying skill

We all have the right to bring attention to things that aren’t working or need improvement. Even so, the ability to identify problems doesn’t qualify us to run the organization exhibiting those problems.

For example, my alma mater is (putting it politely) having a rough decade on the football field. It’s easy to note my team’s problems (or at least the symptoms), including their consistent inability to win a game after trailing at the half. When this doesn’t happen for six years, it stands out.

The ability to identify the team’s problems doesn’t qualify me to run a NCAA football program. That’s why I didn’t offer a solution. I might have theories, but management expertise doesn’t make you a coach.

The same kind of expectations exist for that political office. It’s real work. The ability to criticize isn’t enough. The job requires related experience.

If you want a job that requires leading the management of a $25 million budget, people expect that you’d have a fair amount of experience successfully managing a budget of at least low seven figures. Criticizing your opponent’s handling of the budget is fair game. Likewise, so is the public’s desire to hear about your experience and specifics about what you’d do differently and why.

If you want a job that requires leading the management of a team of ~900 employees, you should have experience successfully leading the management of a team of 100 or more. Tell us about your management successes, what you learned from your management struggles, and specifically how you’d make things better. Don’t think we won’t be taking notes and coming back to them to remind you of your suggestions if you win.

Criticism in the workplace has similar demands. If you provide context and propose specific solutions, great. If you’re simply complaining – does that help you, the company, or your target?

Embarrassing people isn’t criticism. It’s ego.

While I frequently discuss inept, unfortunate, or unproductive business behaviors I’ve experienced, I avoid mentioning the business. Why? Embarrassing an employee or business owner serves no purpose. It doesn’t improve the lesson / advice. It doesn’t positively serve the reader, or the business. It’s the kind of criticism that accomplishes nothing.

I prefer to shine a light on things a business can improve how they serve their customers. In turn, this gives the business a better chance of not just surviving – but thriving. It should also build job security for their team, and help the owner’s family benefit from the risk they took wh en opening a business.

To make your team’s feedback loop more valuable, teach them how to deliver effective criticism.

Criticism delivery determines the response

Whether running for office, grumbling about your team, or criticizing how you were treated in a local business, how you deliver that criticism says more about you than it does the recipient. It also plays a substantial part in how your criticism is received and the response you receive.

Criticism is not a bad thing. We all need it. It serves the recipient, not the one delivering it. Much of the criticism people given these days serves only the ego of the person doling it out – and does nothing for the person receiving it.

Ego-driven criticism looks like this: “(business / org / person) is terrible at (whatever). Fire them.

Effective criticism is intended and designed to help those receiving it, rather than drawing attention to the provider.

When delivering criticism, include specifics and where possible, suggestions for improvement. Describe the problem behavior / activity / outcome. Compare it to the desired behavior / activity / outcome. Discuss solutions. Ask how you can help. The outcome is usually what needs to be fixed, not the person.

Think about the best criticism you’ve received. What made it so valuable? Consider that when criticizing the work of others. You’re giving them a gift.

Photo by AutrementDit Toronto.

Why your growing company needs to work slower

You might have seen last week’s discussion of automating administrivia and clerical work simply as a systemization of the E-Myth. That’s fair, but remember that the goal was to reduce cognitive load on focus workers. We didn’t eliminate ALL administrivia and clerical work – and you can’t. Discussions on scaling a growing company rarely cover the burden this work creates. The key to keeping this work from bogging things down? Work slower.

Work slower?

A few years ago, Richard Tripp and I were talking about the challenges of installation and on-boarding in complex enterprise environments. He started the conversation by asserting that “Slow is smooth and smooth is fast.”

As he explained, you have to slow down your processes to improve them.

On a rough road, potholes, dips, and washboards make it difficult to drive safely at high speeds. On a smooth paved road, accelerating to and maintaining cruising speed is easier, safer, and more comfortable. The situation is exactly the same for a growing company’s admin and clerical work.

Note the emphasis on “and maintaining” in the previous paragraph. It isn’t fast to repeatedly accelerate, slow down, then accelerate back to cruising speed. It’s jerky and disruptive. If processes aren’t streamlined and capable of consistent speed and volume, then the work is neither smooth nor fast.

A flat tire on a busy highway

Process disruptions kill you when you’re trying to scale operations.

Fits and starts are demoralizing. One-offs to deal with random failures and issues consume a ton of time and take your team off task. This frustrates your team and delays work output – often backing up other work as a result.

These problems impact your operations like a flat tire affects travel on a busy highway. When a car has a flat, the impact isn’t limited to that car – it slows down the surrounding cars.

In your business, work (traffic) backs up, plus the task that suffered the failure (the car with the flat) is completely halted. Any work dependent on the stopped task is also at a dead stop. A shipment stuck in production can hold up packaging, shipping, the loading dock, invoicing, or other areas.

When you work slower, you create time and space that makes it easier to identify and eliminate the bumps and potholes in your processes. “Slow is smooth” takes shape. It’s about reviewing fundamentals, but also about the deconstruction and review of each part of the process.

Hummingbirds and governors

If you’ve ever watched a hummingbird fly, there’s not much to see. By naked eye, the wings are a blur at best. The bird hovers and appears to veer about as it flies. It seems anything but smooth.

In a slow-motion video, the beauty of a hummingbird’s flight is revealed. Every motion is smooth and consistent – motion that looks much different to the naked eye. Likewise, slowing down your processes and analyzing them step by step allows you to identify inefficient motion, poorly designed screens and paperwork, as well as unnecessary steps.

The elimination of inefficient motion isn’t the reason for a governor, but the idea is similar. A governor is a physical device that changes position as rotational speed of the governed mechanism increases. Eventually, rotational speed reaches a point where the governor moves into a position that cuts the throttle or otherwise limits the speed of movement.

Like speed, scaling reveals flaws

Governors are used to limit machine speed, giving the machine a means of protecting itself.  A mechanism without a governor could gain enough rotational speed to tear itself apart.

Your processes at at risk in the same way. If your business is used to shipping 100 items a day or onboarding 15 new customers a month, things change when you double those numbers – or add a digit. Where 100 shipments a day sustained you, 1000 a day might put you out of business. Under those conditions, an ungoverned not-so-smooth business can tear itself apart.

Smoothly-operated, well-rehearsed processes can accelerate to high speed and high volume without exploding – thus “smooth is fast“. You may need to get faster equipment to handle the volume, but faster equipment won’t fix a broken process. It simply breaks it at high speed.

Improving the efficiency and effectiveness of your work processes allows you to be ready to “remove the governor” at any time, without allowing the business to destroy itself.

Raise productivity by lowering cognitive load

Are you trying to figure out how to help your team become more productive? Traditional efforts to raise productivity will help, but are they enough? At some point, you’ll find that the law of diminishing returns will take over. Rather than give up, you & your team need to reassess the team’s workload and how it’s handled.

It’s important! It’s mandatory.

Traditional attempts at workload assessment usually include a re-prioritization of tasks. Regular priority assessment is a good thing, but not often a great thing. Sometimes it resembles “rearranging deck chairs on the Titanic”. What takes a re-prioritization from good to great is leaving your team open to not assigning a priority to EVERYTHING – i.e.: giving permission to not do a task. It’s OK to identify work as “work we don’t need to do”, or “work we don’t want to do”. However, your team still has to do this work because “It’s important!” and/or “It’s mandatory”.

There’s “mandatory because the law requires it”, but there’s a second form of mandatory that’s rarely talked about: “mandatory because I said so”. Some tasks legitimately fit this criteria, but many shouldn’t. The quote “Mandatory is one of the crutches we use when we can’t lead people.” speaks to these tasks. I’ll bet we’ve all seen this type of mandatory task in the workplace.

Mandatory doesn’t mean a person has to do it

Mandatory workloads tend to be administrative and clerical work placed on non-admin / non-clerical team members. Sometimes, it even includes administrative and/or clerical work placed on admin / clerical folks. Some of this work is necessary and important, like timekeeping for employees whose time is billed out to a customer. The rest should be subject to re-prioritization.

Your team has to stop doing unimportant work so that they can focus on what IS important. I’m sure you’ve heard and thought that before. Even so, we continue to put more “administrivia” work on our people. Sometimes this work is important, but if you look a little harder at it, you’ll find that much of it can be delegated. My favorite team member to delegate this kind of work to is “systems”.

Why do you want to either stop doing this work or delegate it to someone other than an employee? Cognitive load.

Every task you give a person increases their cognitive load. Take a high-value employee who does focused work for you. If in addition to that work, they also have five or more daily administrative / clerical tasks on their plate, those things have to be remembered.

Why does cognitive load matter?

Ever notice how you suddenly remember things at two am, or when on a walk, or while on an airplane? At two am, you’re usually sleeping. On a walk, your mind is free of all the things at your desk. On an airplane, the restrictive environment means your phone is useless and often, so is your computer. Those environments have a lower cognitive load, and suddenly, your brain remembers things again.

Extra tasks competing for brain power create “rush hour traffic” for the brain. Driving a car full of kids in heavy, urban traffic is more mentally draining than driving them on the open road. The complexity of heavy traffic and urban roads make driving more challenging. Add a bunch of kids in the car and.. well, you’re probably all over what cognitive load means. Add darkness, rain, and fog. Each layer increases the cognitive load your brain must manage in order to drive.

New administrative and/or clerical work increase the total cognitive load for employees who do focus work, decreasing the importance of their “real work”. Are these admin tasks more important than the number one task any random team member is expected to complete that week? My guess is that they aren’t.

Lowering cognitive load via systems

Work that requires deep thought is sabotaged by interruptions. We “clump” meetings together in order to reduce interruptions and increase available focus time. We clean our office to reduce clutter – and thus visual “noise” / distractions. Unnecessary tasks, office clutter and interruptions all add to cognitive load.

People under high cognitive load don’t need darkness, fog, or rain (interruptions / clerical work) added to their “drive” (workload). While these tasks can’t always be eliminated, they can often be automated. If someone is making a phone call or checking a website multiple times per day to determine if an action should be taken, is there a way to automate that determination? If you have systems tracking various aspects of your business, is someone manually tabulating that info? Is there a way to automate that tabulation? What can you eliminate or reduce? What can you automate?

Photo of Atlas by Simon Cope

Discarding clients & the math of job security

How often are you discarding clients? When fussy, needy, and/or high-maintenance clients complain repeatedly, there’s significant temptation to simply toss them out with the garbage. Some business owners build “filters” into their marketing designed to repel such clients.

When an existing client provokes thoughts of “Life’s too short to deal with this“, who fires them? How is the decision reached? Is the process documented? How is the decision communicated to the client and to your team?

Hammers, nails & curmudgeons

I asked some friends how they describe people they’d fire as clients. Their responses included unreasonable, unrealistic, frustrated, afraid, disgruntled, troublesome, pedantic, rebarbative, cranky pants, curmudgeon, etc.

Are you teaching your team that getting rid of imperfect clients is the only acceptable solution? Owners know there are situations that don’t merit dropping a client. Owners discard clients based on their experience. Does your team have that experience to back up their decisions? Take care that your team doesn’t use this tactic like a hammer while seeing every complaining customer as a nail.

It’s essential to be careful using “You’re fired!” as too-frequent use can damage your reputation. Businesses learn to detect bad apples and few are surprised when these clients get fired. Taken too far, your business can get a reputation for arrogance. People will think you discard clients the first time there’s an objection or even a question. You don’t want your reputation to be “At the first hint of a problem or even a question, they tell people to leave and not come back.” Some prospects will hear that and decide not to show up.

The math of discarding clients

Discarding clients sometimes feels as easy as pulling a splinter. The pain and aggravation fades quickly, making you wonder why you ever tolerated them. Even so, every choice to discard a client impacts your bottom line. While getting rid of high-maintenance “time vampires” will probably improve your bottom line, you have to be careful not to let your team believe that’s the only solution available. That’s where the math kicks in.

If your team gets rid of one customer a month, what does that mean to your bottom line? You likely know the typical customer’s lifetime customer value (LCV). Owners usually know how often the typical customer buys from them. They also typically know how much customers spend on average per transaction. Combined with the rate at which you are adding new customers, you can determine what an improper “firing” costs you and how long it takes to recover from it.

Uninformed profitability math

Employees don’t usually know the financial impact of discarding clients. When you explain the financials of your business to your team, it helps them understand why you think the way you do. Tools like “The Great Game of Business” (start with the book) help employees understand how the business works financially (free resources) vs. how they think it works.

Learning how the business works from a financial perspective encourages employees think more like owners. It can alter “I’m working my tail off for $15 an hour while the owner gets rich.” to something closer to reality. Even if the owner IS getting rich due in part to the risks they took & the investments they made, “uninformed profitability math” isn’t healthy. This “uninformed profitability math” rarely create behaviors that are positive for the business.

Many employees have never had the opportunity to see how their work (and how they work) impacts company financials. Meanwhile, business owners regularly complain how their people don’t think like owners. Part of that thought process is understanding the financial impact of events that occur in the business each day. Knowing that what your work does for the bottom line carries substantial value.

A “We’re having a good (or bad) month” message to employees is rarely accompanied by data explaining why. Understanding what good and bad month means affects the security a team member feels about their job. This impacts their confidence in their ability to provide for their family – and certainly affects job performance and attitude.

What does “we’re having a good/bad month” mean at your business? What message does it send to your team?

Photo by Shinichi Haramizu

Is it better to keep a customer or replace them?

“$29 per month… NEW CUSTOMERS ONLY!” Most of us have seen something like this and thought less than pleasant things about a vendor who hangs these new customer offers out in public where existing customers can see them. That bargain basement deal that’s not available to existing customers doesn’t make you feel good about your decade-long relationship with that business. The loyal customers who have stuck through good times and bad with that vendor – including their mistakes (which we all make).

The thought?

“Where’s my screaming deal?”

It isn’t that these deals are inherently bad. The mistake is putting them out there in front of everyone – including your current customers. If you can find a way to avoid showing the “loss leader for new customers only” offer to existing customers – avoid it. In some media, you can’t avoid it – so don’t use that kind of offer there. It ticks off your loyal customers. Every. Single. Time. Your customer service team gets to take flak about this each time you run these promotions.

Meanwhile, a lack of communication to existing customers plants the thought in customers’ minds that their vendors take them for granted. We know you’re thinking of us when you outsource customer service to Jupiter to save $1.29 per hour, or when you discuss how to shrink receivables. What sort of effort do you invest to retain existing customers?

If you have convinced your customers that you aren’t thinking about them & that you’re more concerned about getting new customers – why should they feel differently about you? You’re advertising for new clients everywhere. While those ads are out there chasing down more new customers to fill the leaky customer bucket, are your long-time loyal customers (and the rest of your customers) being ignored?

All the single ladies

Look at it this way: If you’re someone’s steady “significant other” and they are constantly out chasing down new “others”, most of you wouldn’t take that so well.

Why should your customers feel any different when they aren’t being wooed, cared for, thanked, communicated with, or given any special attention? They only seem to get attention when they call to report (or complain) about a service, delivery, or product failure. Once the initial sale is concluded, is the only time you connect with your clients when they contact you, or something has broken or otherwise gone wrong?

“That’s what everyone else does.”

You might be thinking “That’s what everyone else does. Why should I behave differently?

You are, or have been, a customer of car dealers, cable companies, dry cleaners, restaurants, various repair shops, handyman services, plumbers, sewage tank pumpers, electricians, hair salons, clothing stores, hardware stores, quick lube shops, etc. Almost all of them are advertising for new customers this week. How many of them are ALSO communicating with you to keep you, to bring you back, to make you feel good about being a customer, and/or encourage you to refer them to someone you respect and/or care about?

Very few.

They’ll likely continue appearing to take you for granted for weeks, months, or years – all while chasing new customers, all while grumbling about churn as they slowly lose customers to someone else’s $29 new customer offer. Don’t be that business.

Doing only one of these (looking for new, caring for existing) is not sustainable. Yes, I know it’s more work to do both. Most places need to get new customers, but most of those same places spend a lot more money & effort to get a new customer than they do to keep and care for an existing customer. Doing both means making an effort to protect the asset you paid for – yes, customers are an asset. Perhaps not in accounting terms, but in the real world where customers don’t grow on trees, we’d all rather have more long-time customers and others begging to do business with us.

Don’t spend $12 to get a customer this month, only to ignore them hereafter and hope they stick around, and then go spend $12 to get another one. That assumes you know how much it costs to get a customer (and it’s always more than you think).

Recycling customers is expensive.

Take better care of your existing clientele. Well cared for clients tend to buy more, buy more often, & for a longer period of time. They refer their friends & colleagues because they finally found someone who gets it. Be that someone.

Photo by martin.mutch

Training: One cure for sales problems

When having a conversation about sales problems, I might remind you about the folly of only taking cash (depending on the type of business). I might also remind you to eliminate the tedious & annoying out of your buying process. There are cases where that’s useful, but mostly – it isn’t. But not today. Today, I’d like to remind you of the value of training your sales team.

You’ve got questions

Heard of Quora.com? Quora is a website where you can ask questions. Many times, you’d never have access to those who answer: world-class subject matter experts. If you asked an airplane question, you might hear from an engineer who helped design it & three commercial pilots who fly it.

Why Quora? Because I found a Quora question pertinent to this discussion: “What can businesses learn from the military?” It reminds me of the not well informed “Why don’t non-profits run like a business?” question, but this is a much better question.

A Marine named Jon Davis who deployed to Iraq & Afghanistan answered: “Training”.  His answer breaks down like this: 1) A detailed process to track progress. 2) Regular job specific training. 3) An annual schedule to ensure standards are met. 4) Find & reward teachers. 5) Ignore the “training them to leave” myth. 6) Discipline.

If those six items are checkboxes – can you check any of them?

I’ve recently met several folks who work in the car business. The one I wrote about last week is the only one I’ve encountered recently who knew the product well. I don’t mean he could wake him in the middle of the night & tell me (blindfolded) how to change a timing belt. I mean he didn’t have to run to the showroom to find out the horsepower for a vehicle whose manufacturer makes cars with only two engine choices across the entire product line. Yes, it happened.

This isn’t a sales team failure. It’s a management failure. Are you preparing your salespeople to succeed? Product knowledge isn’t what sells cars. Rapport is. Guiding me to a “special value” (car that’s been on the lot too long) because it pays more than a mini (minimum commission) doesn’t build rapport.

A question about the value of rapport: What’s worth more to you, getting that “special value” off the lot, or creating a relationship that provokes me to return every x years to buy only from you for the rest of my vehicle buying days, while also encouraging my friends to do so? You decide.

Sometimes product knowledge is critical: “Can you help me find a good red wine?” The salesperson who knows less about your product than most prospects will struggle – & reflect poorly on your business. You need someone who understands the problems your prospects want to solve & how your solutions address them.

Don’t have a sales team? Still affects you.

One of the best parts of the answer Jon gives relates to on-boarding. He describes how the military trains recruits and leads them. He then compares that to the training that most businesses provide: haphazardly, if at all, and with little ongoing mentoring –  which unfortunately matches my observations over time.

You probably hire experienced people so they’ll step in & become effective quickly. Do they do it the way you want it done? Did they learn a completely different way of doing what you do? What if you don’t want them to do it that way? How will they learn your proprietary way of doing things?

Don’t assume an experienced new hire has mastered the systems, machinery, methods, and processes your business uses to succeed. Learn from their experience, but train / mentor them.

No matter what, the last thing you ought to be doing is turning them loose on your customers, prospects, products, and services and simply assuming that everything’s going to work out. Maybe it will. They might survive, or get by, or be good enough. Did you exert all that effort to find just the right person only to toss them to the lions with the expectation that they’d get by?

How much does it cost each time you have to replace a poorly trained salesperson who failed? How much does it cost to keep someone who isn’t as effective as they could be because they had to learn your ways by the seat of their pants?

Photo by formatc1