How to catch up on your business reading
By Jim Kendall
This column originally appeared in the November 16, 2015 Daily Herald
If your to-read stack keeps growing, try the following: Condensed, mostly “how to” content written by three skilled small business advisors – Ray Silverstein, Barry Goodman and Lee Eisenstaedt – with typically useful ideas.
Eisenstaedt, CEO of Chicago-headquartered Value Drivers LLC, tends to focus on customer strategies. Goodman’s Birkdale Report is written primarily for owners thinking about selling, but the content is applicable to many of us. He is managing director, Birkdale Transition Partners LLC, Chicago.
Silverstein is president of PRO, the President’s Resource Organization. PRO is a network of peer advisory groups in Chicago and Phoenix. A partial list of Silverstein’s “how to get great referrals” leads off.
“Whenever a customer says something positive about your company, respond with a ‘Thank you’ (and) a prompt referral request,” Silverstein writes. “One of my PRO members trains all her employees to follow this rule.”
Even though “It sounds counterintuitive,’ Silverstein continues, “many PRO members actively encourage their customers to complain. Complaints give you an opportunity to solve a problem, and picky customers often give the most compelling referrals.
“Some entrepreneurs make referrals part of their front-end agreement with new customers – as in, ‘We’re going to work hard to prove ourselves. Once we do, will you give us three referrals in return?’ People like go-getters. Be one.”
Thoughts on how to enhance a business’ value come from Goodman’s Birkdale Report.
Customer concentration, which Goodman defines as a customer that represents more than 10 percent of your business’ revenue, or five or fewer customers that generate more than 25 percent of revenue, is a risk to the viability of any business. For example, Goodman says, reliance on a small number of customers can cause pricing pressures because a few strong customers may have (too much) leverage.
“In such cases” Goodman writes, “diversification – finding other customers and channels, and possibly phasing out large, low-margin customers – needs to happen as soon as possible. It’s easy to get distracted by catering to every need of the few large customers at the expense of finding other, higher margin options.
“By focusing on several higher margin customers, your company may be more profitable and have less risk, resulting in a higher valuation.”
Writing in a late summer blog about keeping clients hooked, Eisenstaedt warned, “When you have just one person regularly connecting with a client, you’ve set the stage for that individual to take the business with them if they leave.
“On the other hand,” Eisenstaedt poses, “say the client doesn’t work with just one section of your firm but with several. In doing so, the client gets to know and build relationships with many different people across your business.
“Now what happens when the contact leaves? Is the client going to go, too? Perhaps, but you’ve certainly made it harder to do when the client has been receiving a bundle of services from several people in your firm.”