According to the National Federation of Independent Business (NFIB), 92% of small businesses said they had suffered adverse effects due to the pandemic. Only 5% of those companies surveyed reported suffering no consequences. Don’t wait around to rebuild your business.
If you are like most companies, you have felt adverse effects from the pandemic.
Perhaps you have experienced a slowdown in customer demand for your products or services. Maybe your company is dealing with changes in your customer’s expectations. Most companies are dealing with operations challenges because of health and safety restrictions.
Economic recovery will take time; you must formulate a plan and get started to lessen the financial impact and speed up your recovery.
According to the Small Business Administration, after the Great Recession in 2008, large companies took an average of four years to regain their previous performance level. Smaller companies took an average of six years.
How long it will take to recover from the COVID-19 pandemic depends on many factors. Still, under two scenarios from McKinsey Global Institute and Oxford Economics, it could take an average of five years or more to recover to pre-pandemic levels.
Here is a three-step plan that’s easy to understand and implement. The cost of losing a customer isn’t as simple as the amount you lose in one particular sale. You lose the entirety of your effort put forth to develop that customer in the first place. You also lose the remaining Customer Lifetime Value (CLV) of that client.
Bring Back Your Old Customers
Customer Lifetime Value is the profit you can expect from a customer over the entire length of their relationship with your company.
If your average customer spends $4,000 a year over ten years, and you spend $500 in marketing to get that customer in the first place, the Customer Lifetime Value of that customer is $39,500.
Depending on which study you believe, it can cost anywhere from five times to 25 times more to get a new customer than to go back and get the old customers to do business with you again.
Go to your business records and identify those customers you haven’t done business with in the past few years. Rank them in order of priority, usually the most significant revenue potential. Contact that customer and win their business back.
Step one in this plan is to get your old customer back. Health and safety concerns have made maintaining in-person business relationships with existing customers during the pandemic challenges. Reestablishing in-person contact is the cornerstone of retaining and growing your existing customers.
Much has changed for you and your customer in the business world. A Valid Business Reason to reconnect with your existing customers is to conduct a Tune-Up Customer Needs Assessment to determine what your customer needs now and how best you can serve those new needs.
Hang on to Your Existing Customers
Just because your customer is still doing business with you, don’t assume all is well. Business owners and managers are constantly reevaluating their vendor base to ensure they get the best value proposition. Indeed, even though in-person business contact has been challenging, your competitor’s marketing efforts to steal your customer doesn’t stop.
Consequently, positive customer interaction with an existing customer will lead to continued business, possible increases in business, and perhaps a customer referral.
A lack of customer service or poor customer interaction will lead to a loss of business or worse. Your customer could switch to your competition, write a negative online review, complain on social media, or tell a friend or colleague.
According to a study by Bain & Company, increasing your customer retention rates by only 5% can lead to increased profits from 25% to 95%, depending on your business category.
Step two in this plan is to retain and grow your existing customers. New business development is fundamental to the growth of your business because, despite your best efforts, customers go away through no fault of your own. Perhaps the business owner retires and closes up the business. The company gets bought out by a company with an established relationship with your competition.
You must have an ongoing new business development strategy.
Finding New Customers for the Future
Getting back your old customer replaces lost revenue. Retaining and growing your existing customer base maintains your current revenue and offers incremental growth. But finding a new customer represents the potential for exponential profit margin growth.
Your current revenue covers most of your cost basis to run your business. Additional customers are more profitable and add significant gross profit to the bottom line.
Yet, far too many sales professionals waste their valuable efforts chasing after marginally profitable or unprofitable customers because they fail to define their ideal qualified prospect, a prospect most likely to buy from you soon. (See my post, The ABCs of a Qualified Presentation.)
Without an ideal qualified prospect profile, salespeople will waste their time and attention on deals that will never close.
Jeb Blount, author and sales expert, says, “Sales is a blend of art and science. The art is influencing people to make commitments. The science is influencing the right people.”
Blount describes a salesperson chasing after an unprofitable deal to a baseball player swinging at a ball outside the strike zone. The batter is likely to swing and miss the ball. But the batter who swings at a pitch in the strike zone is more likely to hit the ball, get on base, and score a run.
Consequently, the third step in this process is finding new customers for the future.
Prospecting and new client development must be a part of your daily routine, not something you do when business slows down and your pipeline begins to dry up. By then, it’s too late. You are behind the curve and you must work that much harder to catch up.
New business development is critical to the future of your business. You must establish prospecting as a priority with clear targets and dedicated time blocks for implementation. Your company may employ many different prospecting and new business development tools to find new customers but keep in mind that there is no magic formula that can replace well-researched and focused outbound prospecting calls.
