What is the purpose of your business?

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. Management wisdom

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.

Conclusion

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 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

Getting the best out of yourself

Employing staff

Motivating your team

Going for growth

Funding your business

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