When you are starting a business, you will need to answer many questions. However, one of the most fundamental questions any business owner will be asked is, what is the purpose of your business?
So what would your answer be?
How you answer the question, has a significant bearing on whether your business is likely to succeed, so we asked Jim McGrath, author of The Little Book of Big Management Wisdom to reveal what your answer should be;
There is no chicken and egg question when it comes to customers and profits
When I’ve asked business owners and managers, in small businesses or start-ups, ‘What do you think is the purpose of your business?’, I’ve had a range of answers but the following two are by far the most popular: (before reading on jot down your answer on a piece of paper);
1. The future bankrupts of the world say, ‘To maximise profits.’
This shows a complete lack of understanding about what business is all about. Survival. To maximise profits you have to take big risks. Small organisations can’t afford to bet the house on long shots as just one miscalculation can destroy them.
2. The more sensible owners and managers often say, ‘To make a reasonable profit year on year.’
This is a sound economic answer but it shouldn’t be the business person’s answer. Why? Because it shows a lack of understanding about the true nature of business and where profits come from.
A business’ most important relationship is with its customers
A good business is built upon a series of interlocking relationships between the organisation and its stakeholders and the most important relationship for any business is with its customers.
Peter Drucker, the only true genius that the discipline of management has produced in a 100 years, realised this and argued that the primary purpose of a business was to create and retain a customer. Everything else flows from that imperative.
Without a customer you cannot make a sale and without sales you can’t produce a profit and without profits you can’t survive. So stop obsessing about profits and instead focus on the source of all current and future profits – your customers.
If you build and nurture your customer base, profits will follow. Happy customers will tell their friends and colleagues about you. But if you concentrate on profits unhappy customers will leave and tell anyone who will listen how bad your organisation is.
How to build a loyal and growing customer base
So how can you build a loyal and expanding customer base? Here are a few ideas that will help you get started. Some of them may seem simple, even self-evident, but you’d be surprised how many organisations fail to apply them.
Change your thinking
As a start-up or small business stop thinking that you are in the tech, media or restaurant business and start to think, ‘I’m in the relationship business.’
This will be difficult for many of you. Your business is probably based on your expertise. While you must retain and improve that expert knowledge you must also go beyond it and create a great relationship with your customers.
If you don’t, then no matter how good your product is, your venture will fail.
Treat customers with care and respect
But it’s no use if you alone treat customers with care and respect. Every member of the organisation has to do the same.
Don’t allow staff to chunter on about how wonderful work would be if they didn’t have to deal with customers and their stupid unreasonable complaints.
Such an attitude quickly becomes embedded in the culture of the organisation and when that happens it’s a major problem to eliminate. It seeps into every interaction between staff and customer, eating away any goodwill that might exist.
Staff training will help to improve customer care but you need to go beyond the basic mechanics of how to deal with customers. Start by emphasising the central importance to the organisation of customers.
Ensure everybody in the business is customer-focused
Explain the power that customers exercise over the business and the dangers of assuming that they won’t move supplier. (The only customers who never move suppliers are football fans. Even when our team is rubbish and the board treats us like morons we stay).
Satisfied customers seldom change suppliers. Unhappy customers do it all the time.
Today, any customer who leaves because they felt exploited and underappreciated can explain in excruciating detail on social media why they left. If they can make their message amusing it can go around the world in 24 hours.
Therefore, regardless of what your marketing book or guru tells you never offer better deals to new customers than those offered to existing customers. New customers are essential to any organisation but don’t risk losing an old friend just to attract a new customer who may be the original customer from hell.
Communicate with customers regularly
Communicate with customers regularly. Use email, phone and personal visits to develop your relationship and understanding of their needs. Listen to what they have to say about your products and how they can be improved.
Ask them about new products they’d like to see developed and what your competitors have on offer. Always be on the lookout for new ideas and when you see one don’t be afraid to back it.
Trust can take years to build and can be lost in the course of a single phone call. Your word is only valuable when you are called on to do something that costs you time, money or effort. Therefore, never renege on a deal or your promise even if it means a short term loss or inconvenience.
Treat customers as adults. If there’s a problem or a delay don’t wait for them to discover it. Contact them and explain the situation. Most people are reasonable and will understand the problem you have and will appreciate that you contacted them.
Reward customer loyalty and prompt payment by offering selected customers higher discounts, better payment terms, special deals and invitations to special events.
Customer care has become an industry in the last 25 years. Like other movements it has its high priests and gurus but really everything it has to say can be summed up in one short sentence ‘Treat your customers as you like to be treated.’
As a little exercise think of all the things that drive you wild as a customer, then consider how many of them are present in your organisation and do something about them.
About the author
This article has been written exclusively for ByteStart by Dr Jim McGrath. Jim has published eight non-fiction books, his latest, The Little Book of Big Management Wisdom was published in November by Pearson, priced £10.99. His second Novel, A Death in Spring: 1968 was published in December. Find out more on Jim’s blog.
More on customers
For more help on being as effective as possible, try these other ByteStart guides;
- How to develop a strong USP and how to use it to attract more, high-value customers
- How to get your customers talking online
- Customer Power: Real world examples of why it’s crucial to get the balance right
- Wisdom of Crowds: 4 ways customers can improve your company
- The power of referrals – How tradesmen can win new customers online
More help from ByteStart
ByteStart is packed with help on all aspects of starting and running your own successful business, just some of our other popular guides include;
Leading a business
- How to be a leader rather than a manager
- Why the best leaders do less
- The Founder’s dilemma – Managing the transformation from start-up to growth business
- Building your resilience to help you cope with the ups and downs of starting and running your own business
- How to create your own support team and increase your startup’s chance of success
Getting the best out of yourself
- Covey’s Matrix: The Simple secret to great time management
- Developing your startup’s greatest asset – YOU
- How you can build your business in 90 minutes a day
- 5 simple steps to overcoming procrastination
- How to build a strong, powerful, strategic network
- What is employers liability insurance, and is my business legally required to have cover?
- Training and developing staff on a tight budget
- A Guide to the National Living Wage for small business owners
- How to prepare for and handle an employee grievance
- The ‘Fit for Work’ scheme – what it means for employers
Motivating your team
- How to design an effective incentive scheme for your small business
- Using staff benefits to motivate and retain employees
- 5 ways to motivate your staff without spending a fortune
- How setting up a salary sacrifice scheme can reward staff and mean lower tax bills for employers and employees
- 5 tips to help you create a great team at your start-up
Going for growth
- 5 steps to kick-starting growth in your business
- How finding a great mentor could help you to grow, and your business to flourish
- Barriers to growth – how to identify them and how to overcome them
- How finding a great mentor could help you to grow, and your business to flourish
- 6 common team challenges – How to overcome them and grow your team
Funding your business
- How to maximise your chances of securing a small business loan
- A Guide to ‘Alternative Finance’ – the new funding options for startups and small businesses
- Finding finance for your new business – funding advice for start-ups
- How peer-to-peer lending offers businesses a new funding option
- What to do when the bank says “NO”!