When one door opens...
By James Butler, Your Business Your Future coach
It's often said that owner managers learn from experience - and that the best experiences to learn from are when things go wrong. So, how do we learn from these situations and turn them into opportunities to improve our business in future?
As well as my work with Your Business Your Future, I am an owner manager of my own business too - and in recent weeks we had the unwelcome news that we had lost a very longstanding client who represented a fair chunk of our revenue. Whilst we truly believe the client's decision is not based on anything we've done or not done, and reflects their own situation, it has caused us to pause for thought.
It is (almost) always bad news to lose a contract or source of revenue, especially when it’s the client’s decision.
A whole range of emotions come to the fore, and one has to find the right way to react, and to chart a way forward. Here are some of the things we’ve considered as we reacted to the news:
What can we learn?
The relationship has come to an end, and it’s important to listen to the reasons given for the end of that relationship. It’s easy to be defensive, think the client is making a huge mistake, or gloss over the numerous acts and decisions that probably led to this point. It’s more useful to hear what the client is telling us, and consider what we can do differently with other clients. Did we work hard enough to establish value, communicate fully, discuss challenges?
What are the immediate implications?
We had factored this client into our plans for 2011 both in terms of revenue/profit and in terms of resources. We now have to revise our growth plans and budgets, form new resource plans and modify our marketing targets to replace the revenue.
How can resources be redeployed?
Hopefully many of you are like us — we’re lucky to have a lot of talent in our team. And some of that talent is now free to do other things. We need to decide how to redeploy them to have the greatest impact. Can we seek work opportunities more proactively than we might otherwise have done? Can we undertake some of those internal projects that we haven’t yet got to?
What does this tell us about reliance on one source of work? The client we’ve lost was a significant source of revenue, where usually we have a broader base of clients. While we had them, it was great - and the hole left is bigger! Now, we need to diversify our client base again.
What’s the new door opening?
We can now look for the next opportunity or opportunities that are coming our way! Redirecting our focus and energy away from the old client and towards new business has already opened doors and brings a frisson of excitement about the new relationships.
Now, nearly 90% of successful growing businesses achieve their growth by selling more of their existing products/services to their existing customers and other people just like them. That’s why “sticking to the knitting” is one of the Seven Pillars of a Better Business. And, since it’s usually at least six times more expensive to acquire a new customer as it is to retain an existing customer, customer retention is clearly a vital part of “sticking to the knitting”.
Research by McKinseys also shows that, in B2B businesses (Business to Business Businesses), the main reason that customers switch suppliers is supplier indifference — the customer thinks the supplier doesn’t care about them any more!
So, some questions to ask yourself:
• When was the last time you spoke to your top ten customers?
• What do you need to do to cultivate those relationships, demonstrate value, and maintain loyalty?
• How diverse is your customer base? How vulnerable are you to losing one customer? What can you do to reduce that risk?
• What plans do you have in place to ensure you know the impact of losing significant sources of revenue or profit?
• If you do lose a contract, how easily can you redeploy resources?
• As one door closes, what will be the other doors that open?
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