One of the first things I learned about business came from a retired ITT Corp. specialist who took control of a company where I worked. He called us into a conference room and asked us what our purpose was as a company. We naturally said it was to build great widgets. Wrong. He told us our job was to collect money! Building widgets, controlling costs, improving quality and customer service were just unique ways of helping the company collect money.

Collect those profits
The onsite systems we install, the portables we rent, and the tanks we pump are our methods of collecting money. If we want our businesses to provide jobs to our employees, services to our customers, and contribute and donate to our communities, they must be financially successful.

Profitability, or efficiency for collecting money, is about increasing sales, but also a result of controlling costs through efficient scheduling, improved equipment maintenance and reduced wasted energies.

Related: Building the Business: Marketing is Job One

That is the background I had when I left the manufacturing company and purchased our septic pumping business more than 15 years ago. Using the following principles, we have grown our business every year with one truck and without adding numerous employees or greatly increasing advertising costs.

Two-sided approach
The first point is no matter how tough the economic conditions, every small business needs to focus on two tools. Tool number one is reputation – good or bad.

What is your company’s reputation in the community? Is it one of honesty and prompt, courteous service? Are you the go-to company in the area? Are you known for providing a good product or service at a reasonable price? Keep in mind, reasonable price is not the same as lowest price. If your goal is to be the lowest-priced bottom feeder, the only jobs you’ll see are those that trickle down from the successful companies. You can’t make up for low margins by increasing the number of jobs.

Related: Editor's Notebook: Beware of Content Theft

On the other hand, is your reputation one of being sloppy and late or a no-show for appointments? I hope not, but some of the companies in our industry are notorious for this type of behavior. Do people remember you by the size of the oil puddle you leave in the driveway or by your final bills being bloated and full of fluff? Hopefully your business is known for top-tier service, good value at a fair price, and worthiness of recommendations.

To get an accurate reading on your company’s reputation, you need to call customers for job follow-up feedback, and be willing to listen to criticism. Also, ask your people what they hear about the company and its reputation. This is not a time to get your feelings hurt or argue with people; it is a time to get honest input about how people view the company.

Value thy customers
The first unique asset, your reputation, is directly related to your second unique marketing advantage – your customer list.

Related: Building the Business: The Power of Testimonials

As an example, Warren Buffet is one of the wealthiest men in America. In 2000, his holding company, Berkshire Hathaway, was the eighth largest public company in the world. For the last 44 years the company has averaged an annual growth in value of 20.3 percent, and its stock produced a total return of 76 percent from 2000-2010.

Buffet stressed the importance of this second asset in one of his annual reports to shareholders. He said the most valuable thing he acquires with a company he buys is the company’s long-term relationships with its customers. This man can afford to replicate the physical assets of just about any company, but what he finds most valuable is a combination of the same two unique tools every small business owner possesses.

Another way to think about this is that repeat customers (often called goodwill by an accountant), which you get by improving and protecting your reputation with existing customers, are the only thing that make a business worth more than its physical assets.

While there is tons of information on the cost effectiveness of retaining customers versus finding new customers, some of the best material has been written by Frederick Reichheld. He is best known for his research on the profitably of developing a loyal customer base, and he was named one of the top 25 business consultants worldwide. Here are a few reality facts from Reichheld to summarize the benefits of focusing on existing customers to earn their loyalty:

  • Over a five-year period, many businesses lose as many as 50 percent of existing customers due to poor service or failure to utilize an existing customer list.
  • Businesses that boost customer retention rates by as little as 5 percent see increases in profit margins from 5 to 95 percent.
  • Acquiring a new customer can cost six to seven times more than retaining an existing customer.

In our industry, it takes a huge effort to secure a new customer. Locating a new job site or residence for the first time and finding you don’t have the right equipment for a unique situation can be time consuming and expensive. For an existing customer, simply pull up records and notes that include directions, gate combos and special equipment needed.

What does this mean to small business owners? In order to grow your business and increase profitability in tough economic times, you must nurture and effectively utilize the customer list. Educate your customers and they will better maintain their systems, and ultimately help your business grow by referring friends and family. They will only do this if the first asset, your reputation, is worth sharing with others.

Next time we will discuss five concepts to maximize your reputation and your customer list.

About the Author
Robb Barnes owns and operates King's Pumping Service in Salem, Ore. He has been trained as a science teacher and has served as the national customer service manager for a multimillion dollar manufacturing company. Barnes is current president of the Oregon Onsite Wastewater Association.


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