WOWZA. Lots of thoughts bouncing around my skull these days. Here are some (mostly) rapid-fire thoughts on achieving better results in your life and business.
Three Numbers You Need to Know
To be clear… you really need to know more than three numbers. That’s why I wrote this whole article on “key performance indicators.” But I strongly suggest tracking the following numbers if you’re not already doing so.
Net Promoter Score
How To Find It: By asking clients, “On a scale of 1-10, how likely is that you would recommend [Company Name] to a friend or colleague?” you can track client satisfaction. Clients that answer 9-10 are promoters that LOVE your business, clients that answer 7-8 are passive, and 6 and below are actively unhappy about their experience with your company. You can use this question anytime you ask for feedback; general customer satisfaction surveys, during exit interviews, at the completion of onboarding, etc.
How To Use It: To find your official Net Promoter Score, you can calculate the percentages of each group, and subtracting the detractor percentage from the promoter percentage.
And — this is the most important part — follow-up appropriately with each customer based on their score. Promoters can be given a free trial to give to a friend or be asked to leave a review on a website. Passives can be asked what would need to change to improve their score by two points. Detractors can immediately get a phone call to find out what’s going on and how to make it right.
Average Lifetime Customer Value
How To Find It: There are a number of different ways to find out your average lifetime customer value, but here’s the simplest: calculate your average monthly revenue and multiply it by the number of months your average client stays with you. This approach is crude but effective.
How To Use It: Once you know this number, you have a sense of how much you can spend to acquire each new lead and each new client. For instance, let’s say your average lifetime customer value is $3k. Now let’s say you usually spend $2k per month on marketing and generally get 10 new clients. Since that’s only $200 per client, you’ve got LOTS of room to increase your marketing spend.
To be clear, there are points of diminishing returns with spending on most marketing channels. And the goal isn’t to purposely try to make it more expensive to acquire new members. However, by knowing this number, you can see how much more bandwidth you have to increase your marketing spend.
How To Find It: Profit margin is the percentage of your incoming revenue that you get to keep. You simply divide your profit by total revenue. Note that this should generally exclude any pay the owner is making as an employee in the business.
How To Use It: Although there are different benchmarks for different industries and different revenue ranges, generally speaking, brick-and-mortar service businesses should shoot for a least 20%. Anything below 10% means the business is in the danger zone; revenue must increase and/or expenses must go down.
While there’s a time and place for the latter, with the exception of egregious and wasteful expenses, you will generally fail to “save your way” into better margins. Instead, focus on dialing in your marketing and sales and making sure you’re consistently delivering your service at a high level.
What gets measured gets managed. But what matters most can’t always be (easily) measured. As Rene Dubos said, “Sometimes the more measurable drives out the most important.”
By all means, you simply have to track numbers if you want to have a sustainable business. However, heed Dubos’s warning!
“I don’t want to hire someone I have to manage.”
I often hear people say they don’t want to hire someone they have to manage.
I understand this impulse, but I think for most businesses, this isn’t realistic.
Sure, at some point, you can actually hire someone who’s a better manager and leader than you. But unless you at least know how to manage and lead the individual who’s managing and leading the rest of the team, you’re not being a steward of your organization.
Furthermore, hiring a self-starter with incredible leadership and management skills is going to be very expensive. You will usually have had to manage and lead people until the business has achieved the level of financial success required to afford your superstar manager.
The same paradigm plays out with marketing and sales. Some business owners want to simply throw money at it and have someone else handle it on their behalf. But this pretty much never works, because 1) you’ll have no way of managing the person doing it if you have no idea how to do it yourself and 2) finding fantastic help with marketing and sales is very, very expensive. Like above, in order to be able to afford to hire someone, you’ll often need to put in some personal elbow grease to grow your business.
None of this is to say you can’t ultimately hire someone more competent than you to handle parts of your business on your behalf. At a certain point, this may very well make sense. But you’ll almost always have to develop basic competency in the functions you hope to hand off one day.
“Are we solving a problem we don’t have?”
I’m a people pleaser by nature. When I hear critical feedback from team members or clients, I want to do everything in my power to address it AND make sure that individual knows I deeply care about their experience.
However, sometimes, this bias for action can backfire. Occasionally the feedback only represents a single person’s experience. And spending time and energy, changing a system or service offering means spending valuable time and energy for both you and your team.
And when you have limited resources of time and energy (we all do!), there’s a real cost to spending that time and energy on a non-problem.
By all means, take all suggestions and critical feedback seriously. Look for patterns as you aggregate feedback from multiple sources. And always close the loop by following up with the individual whenever possible. Let them know their concerns aren’t falling on deaf ears. But be sure it’s actually a problem before you devote lots of time and energy to solving it.
An important corollary to this line of thinking is asking if you’re solving the real problem. In other words, sometimes there actually is a problem, but it’s an underlying core issue that’s not immediately obvious. For instance, you may think a low sales conversion percentage means your leads aren’t qualified. This leads you to believe your marketing is broken. While that may be true, it’s also possible your sales process is poorly executed and/or poorly designed.
Before you go into problem-solving mode, be sure to determine 1) if you really have a problem, and 2) what’s the underlying cause of a given issue.
A) 81% of prospects don’t buy until the fifth or twelfth contact. And yet few businesses have well-designed and consistently executed follow-up system in place: this a huge missed opportunity AND low-hanging fruit for many businesses.
B) System development often goes through three stages:
- There are no written down and clearly document systems. It’s all art and intuition. This is actually ok at first because you won’t have systems until you do something a couple of times and see what works. However, a mature business will have an eye towards building a repeatable system and codifying a given process as soon as possible.
- In an attempt to get more consistency, everything is written down. The system documentation has lots and lots of detail, and every contingency is planned for. The extreme documentation is well-intentioned, very thorough, AND completely unwieldy. In other words, it may be written down, but it’s very difficult to use.
- In this final mature stage, the system has been pruned to no more than six steps, each with no more than a couple of sub-steps. The finished document is often in the form of an easy-to-follow checklist in a convenient physical or digital home that’s easily accessible. Systems that need to be memorized are often comprised of an acronym. Team members are routinely quizzed and drilled via roleplays.
C) When considering a change to your business, ask yourself how easy it would be to change it back if it doesn’t work. For instance, front end offers can be tested and changed very easily, since they presumably only apply once (to brand new people). However, changing a system or policy or service for your existing clients is much tougher. Not only do people not like change, if you test it and it doesn’t work the way you wanted, you now need another cycle of communication (and confusion) just to change it back.
Have A Question or Topic For a Future Mark’s Musings?
I’d be delighted to answer and muse for you!
Shoot me an email at [email protected] and let’s friendship.