How Many Customers do You Need?

Last time I post about who your Customers are.  This time I want to get into a bit more of the blocking and tackling of Business Plan development and ask about the number of Customers Your Business needs.  Most small business owners and startups give me a blank stare when I ask about this.  There is a lot involved in this question.  Brian Tracy (the Founder of FocalPoint) has a concept called “The Customer Formula” as part of his Way to Wealth system.  This formula looks like this:

Number of Customers x Average Revenue Per Customer x Number of Purchases = Revenue

Note that Revenue is a Result of having Customers buy.  I get two pushbacks regularly.

First, I am always told that there is no average customer.  True.  But it does not matter for this kind of calculation.  At AFC, we quoted to investors that we had 800 customers.  This was a true statement.  However, not all of them were active in any given year.  We had some large customers that accounted for the 50% of the revenue (call it Top 5 customers) and they remained constant.  We had active customers that were doing significant projects.  They accounted for about 30% of the revenue and several of them changed each year.  Then we had customers that were just buying upgrades or nothing at all for any given year.  But we still had an average of about $500K per year per customer.  Landing a large customer was hard and we did not get new ones often.  Most of the time we were talking about landing new smaller customers.  Over any time horizon they would generally average about $400K per year in spending.  The rest was compensated for by the large customers.

Second, they don’t have an idea of the Number of Purchases. This number is highly dependent upon the kind of business that you are in.  If you are an Auto Dealership, it is unlikely that you will get more than 1 purchase per year (except for fleets).  If you are a Hair Salon, you should expect 6 – 12 purchases per year for your ongoing customers.  Every business is different, but each of them have an average.  For AFC, generally purchases were done on a location by location basis.  So, transaction count was all about the number of locations per year.  After that, we had many small orders to add additional capacity to any location.

Now all of this depends on the amount of Revenue that you need.  Revenue is not the be all or end all of a business.  Profitability is more important.  But this analysis can help you figure out what you need.  Do you need 10 customers?  100 customers?  1000 customers?  There are businesses that can be built with any of those customer counts.  Each of them is built VERY differently.  That is why this is probably the most constructive financial question to answer first.

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

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Who are Your Customers and What do They Want?

These are the quintessential Marketing questions.  We have talked about us and what we want (as a Business) through our Vision, Mission, and Values (VMV).  What we want to do now is to connect the VMV to our customers.  To be able to do so, we need to closely define who these people are.  That is what we are going to talk about here.

This is not a passing exercise and one that needs to be considered with some importance.  What is most important to consider is what makes you special to your customer base.  This means that we look at what the Value that they place on the business relationship with you actually is.  To do this, we need to explore the customer and the problems that you are solving for them.

The important part here is the alignment between what you view as your Mission Statement and the Customer view of their Problem Statement.  If it is not your Mission to solve their Problem, then in the long term they will no longer be Customers.  This is why your Unique Value Proposition (UVP) is so important to your Marketing.  The goal is to articulate the range of problems that you solve.  The biggest single problem is that most business owners want to embrace a large set of problems that they can solve.  By being broad, they reason that they will get more customers.  The truth is that they are likely to attract more prospects that are not great customers for them.

Suppose you move to a new town and need to get your car fixed.  Let us add that this car is an older Volkswagen.  You do a search for Volkswagen Auto Repair, you might be surprised.  In my local search, I found VW dealers and local shops that specialize in VW repairs.  I also found several websites that recommend VW repair shops.  This happens in all businesses.  By having a very broad message, there are times when this works (for example Grocery Stores).  But most businesses, actually specialize.  If you do not tell people what you are particularly good at, then they will likely select someone who specializes in fixing their Problem.

Because that is what customers do, they fix their problem.  The look for solutions to what they want.  They do not look for what you want to sell.

Have a great weekend!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

How do You Want to be Known?

I have posted about the Vision statement which defines a point in the future for the business to be.  I have posted about the Mission statement which is all about defining the uniqueness of the business.  Today I will post about Values.  These three subjects:  Vision, Mission, and Values are at the core of the start of a Business Plan.

What are Values?  They are adjectives that you want people to use to describe the way that you do business.  This can overlap some with the Mission statement but is intended to be distinct.  For example, if I use the BMW tagline – “The Ultimate Driving Machine”, this tells you a lot about the vehicle but not much about what it is like to do business with BMW.  There are other makers of performance cars (Porsche and Ferrari come to mind) and they compete on both a vehicle level as well as a business level.

That may not be as clear to many readers, so I will return to myself and talk about 3 adjectives that apply to my business.  I want these adjectives to be the way people think about my business.  These three adjectives are Trusted, Knowledgeable, and Visionary.  I will explain how this is intended to align with my Mission statement and my value proposition.

Trusted:  The best way for my customers to use me is as a Trusted Advisor.  I want them to succeed and they need to know that this is true.  As a balance, I cannot just be a cheerleader for them.  I must provide constructive feedback to them.  This is not just about what they are doing wrong, but how they can learn from the past.  Unless I can challenge them, they cannot Trust my advice.

Knowledgeable:  As a Trusted Advisor, I want my customers to be able to accept my work as valuable from an experience and learning standpoint.  This is a challenge because many prospects conflate industry knowledge for business knowledge.  I must demonstrate my ability to transfer business acumen from other industries and situations to be applicable to their situation.

Visionary:  Most people originally engage me to solve a current problem in their business that they are unable to solve themselves.  This is a reasonable way to hire me, but I can provide much higher value.  This value is in my ability to look outward and forward in their business to build it to avoid trouble areas in the future.  We can at the same time identify opportunities to grow and build the organization to capitalize on them as they happen.

So, when people work with me, I need to act in accordance with those 3 adjectives on an ongoing basis.  I cannot violate Trust.  I need to employ experts in places where I am not as skilled.  I need to have a 360-degree view of the business and business environment.  If I do this every time, then customers will understand my Values.

Have a great day!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

What Makes You Different?

Last week, I posted about the company Vision Statements.  As I said, this is the outcome that is expected after 3 – 5 years.  This means it is not a method to get to a state, but the actual place that you get to.  This would include items like Revenue, Customers, and any other S.M.A.R.T. ways of describing the Business.

This week I want to focus on the Mission Statement.  A Mission Statement is where you define what you do and what makes you special.  A lot of Press Releases will describe a company as “A Leading Provider of” whatever industry they are in.  That is too bland for a Mission Statement.  There is no way to do this without having a strong view of what you do and why people should buy from you.

Let me use my Mission Statement as an example, “I will deliver exemplary Business Coaching, Consulting and Training through a combination of Strategic Planning, Financial Acumen, and Operational Excellence.”  I hope that defines me in a way that makes sense on who should hire me.  If you are looking for a person that focuses on emotion, I am not your guy.  I am a nuts and bolts business person.  I want to know why everybody is on the payroll and that they know what they do to deliver Bottom Line results.  I have talked to many employees who have no measures of what they should be delivering to make the business work.  The answer that they have not discussed with their supervisor or Business Owner.  This means that employees may not understand what the most important part of their job is.

If you pick my Mission Statement apart, you will see three things that I focus on with my clients.  Strategic Planning is first because I need to ensure that a Business knows where it wants to go.  Financial Acumen is second because I want my clients to think of their business as an investment and we want to maximize their return.  Operational Excellence is third.  Once we know where we want to be and understand the Financial consequences are, we can plan for a path to make the business perform in a way that meets their needs.  There are consultants who focus on various parts of the Business.  I like to meet them so that I can refer business to these experts.

I hope this helps make sense of a Mission Statement and have a wonderful day!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

The First Thing in Business Plans

One of the challenges of being a Business Coach is that people approach us with a Tactical Mindset.  They want me to tell them what I would do for their business today.  I do have people hire me that way, but I consider that Consulting and it is almost always project work.  I perform a specific task or set of tasks for them for an agreed upon price.  There is nothing wrong with Consulting and there are cases where people should hire me as a Consultant.

Coaching is not Tactical.  Coaching is Strategic.  When I meet with people, I want to talk about Vision, Mission, and Values.  This is a hard conversation because they see the Tactical.  It is natural.  The thing is that the Business is a journey.  Without knowing where you want to end up, then it is really hard to know if you are headed in the right direction.  So when people ask me about Tactical work, I know they either have a really good handle on the Strategic or no handle on the Strategic.

The place I start to investigate this is via Vision.  When I ask for a Vision from many owners, I often get a Mission Statement and I have to back up to what a Vision actually is.  A Vision is a Destination in the Journey of the Business.  For ongoing businesses, this may be a Waypoint to the next Vision.  For other people, this defines the end of the Journey as they are exiting the Business.  Either way, it has a number of S.M.A.R.T. attributes.

One of the ways that I find that this is a Mission statement is that what I am told that they are “The Best at Some Occupation”.  That can be part of a Vision, but then we need to define how this will be measured and what other Parameters can be defined.  For example, maybe I could be “The Best Business Coach” by having a specific number of speaking engagements, a specific number of books sold, or a number of blog followers.  I could also use Revenue or Number of Customers or Customer Revenue Growth as potential Metrics.

A more typical example of a Vision would include specific Revenue, Profitability or Business Valuation.  When Business Owners write down a Vision, this is not normally where they Start.  Once a Vision is defined, there is a lot more work to do.  However, with at least this much in place we can start looking at the Tactical Work and see if it makes sense it the current content.

Have a great day!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

Business Plan Building Blocks

I just finished a series of blog posts on the primary causes of small business failures.  One of the best ways to avoid this fate is to have a living Business Plan.  We will get to the living part over time, but we need to look at the right way to build a Business Plan.  This blog mini-series will help owners organize their thoughts coherently to be able to produce an effective plan.

Most people think that creating a business plan is a linear process.  You fill out some forms and some spreadsheets and it is done.  You then put that document in a drawer and leave it until you clean out the drawer.  A true Business Plan is a living document that requires iteration, even at the beginning.

There are two overall portions of a Business Plan.  They are the narrative and the financials.  These portions need to support one another.  This means that if you have a financial projection to grow revenue, then you need a narrative on how you are going to achieve that growth.  It needs to be obvious on how these connections are made and how any changes will work.

Most Business Plans are three (3) to five (5) year documents.  You will have a supporting Annual Plan for the current year and that needs to line up and be the next step in executing the Business Plan.  The reason that the Business Plan is extended is that you want to be able to produce the Business that you want.  If the time frame is too limited then there will not be enough time to change the direction of the business.

I will talk about the narrative first in a series of posts, but this will break down into several major sections:  Mission/Vision/Values, Market, Customers, Products/Services, Sales and Marketing, Operations, and Administration.  Depending on the business, some of these sections will be significantly larger than others.  But each area needs to be touched upon and has a definite purpose.

Have a great day!

Jim Sackman

Focal Point Business Coaching

Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

As we Approach the 4th of July

I sit here and wonder what our founders would have thought of all the troubles we face today.  I think that they would be shocked by our society in general, but understand that the things we argue about now are often things that they argued about.  Sometimes they use harsher rhetoric and move violent methods than we see today.

We use the 4th of July as the Celebration of the Declaration of Independence.  We announced that Life, Liberty and the Pursuit of Happiness was rights of all.   We declared that all men are created equal.  We formed a government that lasted for about 11 years.  Our replacement government had slavery written into its fabric and it would be another four score and seven years before this was overturned with blood.

Our conflict reaches back even further with direct causes in the English Civil War.  Parliament inserted its rights, especially over taxation.  British Colonies (including the US) were under the direct control of the King.  The pushback on taxes was about being taxed at all, but also over the right to vote on those taxes like English citizens in the United Kingdom could.  Having Parliamentary representatives would not work due to distance.  You could not expect to get a fair read from voters that were months away on news.  The King did not want an American Parliament to be formed (like the Continental Congress).

Before we sorted out these major early issues, we had fought four major wars.  We had duels over policies.  There were fist fights in Congress.  There were many horrible acts of violence in places like Kansas.

But here is the thing.  In the end, we have always come back together.  My neighbors are not my enemy.  We might disagree.  But my fellow Americans are not my enemy.  Demoguegory and Mob mentality is the enemy.  So, be civil and work together to govern.  In a Republic (and the US is NOT a Democracy), compromise makes governance possible.  Calling the other guy stupid or evil does not help.

So, please have a safe, fun and Happy 4th of July.

Jim Sackman

Focal Point Business Coaching

Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!