Why Business Development is Vital to Your Success By: Forrest Farmer
Many businesses are started by people who have developed technical skill and acquired considerable knowledge in their industries. In the cleaning maintenance field these individuals are exceptionally good at cleaning and maintaining buildings. They start their businesses after realizing there is potential for much greater income as a business owner than there is being an employee working for wages.
So they fire their bosses and strike out on their own not knowing that there is much more to running a business than knowing how to professionally clean a building. They base their new enterprises upon the common entrepreneurial myth that anyone who is a technical expert is automatically guaranteed success in business.
After six to twelve months of struggling with business management, new owners begin to realize that there is much more to operating a business than just being a technical genius. The day-to-day pressures of people management, organizational management, marketing, operations, and financial management begin taking their toll. Many begin to wonder, "Will an aggressive sales program fix my problems?" That's often where entrepreneurs first turn. They think that more sales will take care of everything.
Will an Aggressive Sales Program Fix Your Problems?
It's true that more revenue will solve many problems in a business, but to get that added revenue the company must have more sales. With increased sales comes the responsibility of taking care of more customers. The added pressure of needing more revenue for cash flow and retained earnings causes many owners to go on an aggressive sales campaign only to find that with all that new business their problems have compounded instead of diminished. It's true that with increased business more revenue is generated, but so are customer complaints and employee problems, if the company isn't adequately prepared and properly structured.
Why It's So Hard for Some Contractors to Keep Customers
If a business is not adequately prepared and properly structured, as new business comes in the front door, old customer accounts will go out the back door, resulting in the business owner being no better off than he was prior to obtaining the new business. In reality the owner is worse off. He has concentrated so heavily on obtaining new business that he has neglected quality customer service for his steady bread and butter accounts that are now leaving along with the good references they once gave.
Some contractors who have been in business for ten to twenty years find themselves with only a dozen or more monthly customer accounts. In ten to twenty years a contractor who is trying to grow should have a steady customer base of at least fifty to one hundred accounts. Successful competitors in the same area who have been in business the same length of time often have more than a hundred accounts, sometimes several hundred accounts. Companies that have high customer attrition (loss) often spend a great deal of time, financial resources, and energy on sales and marketing. But the number of accounts just doesn't increase for reasons stated above. Nevertheless, is a high number of accounts the measure of success? If not, what is the measure of success?
What Is the Measure of Business Success?
The number of customer accounts in itself does not measure success. Total revenue and retained earnings are just as important. Yet, a few large accounts with a half million to a million dollars annual revenue can boost sales volume to a level that gives the contractor a false sense of security.
For example, if your annual revenue were two million dollars but you only had ten accounts, what would happen to your company if you lost one or two of your accounts? If all accounts were the same size (although that doesn't happen very often) each account would bring in two hundred thousand dollars a year. On the other hand, if one of the ten accounts were a million dollar account and the other nine accounts totaled a million dollars in annual revenue combined; you surely would feel a seismographic tremor in your business if you lost the million-dollar account. Undoubtedly, you would have to let go some of your key people and reduce the salaries of others, who you were hoping would be there during the next level of growth. Instead, they are now out looking for jobs with your competitors. So, what is the key to steady profitable growth with a steady customer base?
The Key to Steady Profitable Growth with a Steady Customer Base Technical knowledge is important and sales are important for business success, but in themselves neither will guarantee long-term success. More is needed. A company that has been in business for a number of years and is going through one major crisis after another needs at least three years to turn the company around. Even the most successful and most profitable companies will go through crises, but they have systems, processes, and plans in place to steer them through troughs and valleys. So, if business success is not dependent upon an aggressive sales program, what is it dependent upon?
The success of a business is directly related to customer satisfaction. Everyone in the company must be committed to total customer satisfaction. If there is a weak link in the way customers are serviced and treated, there is the potential for contract cancellations. The reason accounts are lost is usually because something went wrong in the way they were serviced. Cancellations can usually be traced back to a communication breakdown, a reduction in standards, inconsistent quality work, or some other service related issue. Whatever it was, it was bad enough for the customer to look elsewhere for cleaning maintenance services. Knowing that, what is the next step in turning your business around?
The First Step in Turning Your Business Around?
Before a business owner spends valuable resources on sales, he or she needs to have a business checkup to see if his business "house" is in order. Systems, processes, and plans must be in place before new customers are sought and obtained. Rather than obtaining new customer accounts only to lose them after a few months, it would be much better to never have had the account--at least not now--because those customers probably won't do business with you again even after you get your house in order. They have formed an opinion about your company and are out telling others what they think. It's much better not to sign contracts with customers if you are not ready to give them anything less than superior quality service. This is not to say that in some instances you can't get back a former dissatisfied customer. It can be done, but only after you have completely changed your company image and the way you do business. The place to start is with an investment in a business development program of organizing, systematizing, and ramping up all your processes. You want your business to be strong and profitable before you dramatically increase the number and size of your customer accounts; otherwise, you will be spinning your wheels and wasting valuable time, resources, and doing harm to your company's good name