Running a business is hard. There’s always so much to keep track of and think about that it’s easy to lose sight of what’s important in your business.
If you break it down, there are only 3 things that truly matter for your business: how do you get customers, how can you maximize profit per customer, and how do you keep your customers coming back.
Without these 3 things, you wouldn’t have a business. Each of these are simple to think about, but it can be complicated to get them right.
1. Getting Customers
Being able to acquire customers is the foundation of your business. For this reason, you should have a crystal clear understanding of who your customers are and where they come from.
Even with low profit margins or high churn, being able to consistently acquire new customers is the most important aspect of your business.
As Peter Drucker once said, “the purpose of business is to create a customer.” And without customers, there is no business.
2. Maximizing Profit Per Customer
Once your business has customers you need to focus on ensuring that every customer is profitable and maximizing that profit. For businesses where customers purchase more than once, this is often referred to as customer lifetime value.
The two most common ways to maximize profit are by using the right pricing and by reducing costs.
Pricing is a complicated art and science but it’s absolutely essential that you get it right. If your prices are too high you won’t be able to get enough customers. However, if your prices are too low then you won’t have high enough profit margins.
For a good place to start on learning more about pricing, I recommend the book Pricing with Confidence.
You can also maximize profits by reducing costs, which will increase your profits. Often times by using process improvement and process automation to streamline your operations you can achieve significantly reduced costs.
If you have a variety of other products and/or services, you can also up-sell and cross-sell your customers to increase revenue per customers and thereby increasing profit per customer (customer lifetime value).
3. Retaining Your Customers
If you have a steady stream of customers and you’re profitable then you can focus on keeping your customers for as long as possible.
The simplest approach is to follow up with your customers and remind them to purchase again, when the time is right. It sounds obvious but many businesses fail to actually do exactly this!
How many past customers do you have who haven’t made a purchase recently? Schedule time to reach out to each of them and you’ll be surprised at how simply many of them will soon return to purchase again.
You can also up-sell or cross-sell customers to purchase other products and/or services. This is one of the most effective methods for retaining customers that can also increase the profit per customer by expanding or upgrading what they’re purchasing from your business.
Again, many businesses don’t have a process in place to up-sell or cross-sell customers but this is one of the most cost-effective and simple ways to significantly increase sales while also reducing customer acquisition cost and lifecycle.
Evaluate Your Business
Schedule some time to evaluate your business and consider how you can improve in each of these areas.
Here are some questions for you to consider and discuss to figure out how you can make your business even more successful:
- What type of customers are you looking for?
- How do you currently acquire customers?
- What can you do to get more customers?
- When was the last time you adjusted your pricing?
- Are your prices appropriate and profitable?
- How are your prices set and what are they based on?
- Are you following up with past customers?
- How and when can you up-sell and cross-sell your customers?
- How can you keep customers coming back?