Brian Anderson built his successful web hosting company from the ground up over the past 15 years. Initially, he worked 80-100 hours a week to make his business successful. So, he was shocked at the impact my simple growth strategy suggestion made on his company. After all, it couldn’t be this easy to increase profits by six figures, could it?
The strategy is based on a simple insight my kids taught me – make sure you close the drain before you fill up the bath, or you’ll be waiting an awful long time for the tub to fill!
In my work of coaching business owners around the country, I’ve noticed a common pattern – companies focus time, attention and money on winning new business, but in the process, let the business they already have slip away.
How about you? How well are you doing at retaining your current customers (i.e. closing the drain)?
Here is a simple four-step process to “plug” your customer leaks.
Step One: Do a “Drop Point Audit.”
Look at the clients or customers who have left you over the past 36 months. Why did they leave? What is the pattern of the timing of them leaving? We call these your “drop points” – the places in your customer relationship when you are most vulnerable to losing them. Also, determine exactly how much it is costing your business in lost gross profit by not improving your drop point(s). This gives you a clear budget within which you can invest to keep your clients.
For Brian’s webhosting company, he discovered that they were losing 48.1 percent of their new customer sign-ups in the first 30 days. A deeper look revealed that many of his new customers never took the significant next step of actually migrating their website to his hosting servers. They got intimidated by the hassle, and just gave up.
Step Two: Brainstorm potential solutions to “plug” the drop points.
What can you do that will improve your retention past these drop points? Could you make the step easier for your customer? Could you leverage the power of a well-timed gift? Could you give additional support for your client through a risky drop point? When you recognize the real cost of your lost customers, investing some time, attention, and yes, money is likely a smart investment.
Brian settled on two simple changes. First, they started to proactively reach out to new customers via email and phone five or more times in the first 30 days to see how they could best support their new customer. Second, he assigned his senior support team to new customers so that any new customer got to work with his most experienced and skilled tech team members during their most vulnerable time – that golden 30 day initial window.
Step Three: Implement these changes, and track your results.
How big of a difference did your retention efforts make? How much additional revenue and gross profit did they help you generate? Make sure you measure your results over a long enough period for the numbers to be significant and not just normal fluctuations.
In Brian’s case, the two simple changes I described increased their new client retention by a whopping 34 percent. This one idea literally increased their profitability by over $100,000 a year.
Step Four: Review your results, and plan in your next round of retention improvements.
While there will come a point of diminishing returns, you’ll likely be able to profitably benefit from two or three rounds of retention work.
Now it’s time for you to apply these four simple steps to reduce your attrition, and increase the way you retain your clients just like Brian did.