The ultimate test of your business is whether you can get and keep customers… profitably.
So your question today is simply this:
Is your company good at getting and keeping customers… profitably?
If your answer is YES, then your underlying business model is working. Now it's time to focus on growing your business and driving your company's profitability and net worth higher and higher every year.
If the answer is NO, then you need to hone in on what's not working properly.
- Is the problem getting customers… profitably?
- Is the problem keeping customers… profitably?
Easier Said than Done
In most companies, defining which of these two functions is the problem is easier said than done.
Maybe you do a good job of getting new customers but you don't know how much you spend to get those new customers.
Maybe you do a good job of keeping customers but you can't seem to generate a level of profit that you are happy with.
Which creates related questions like:
- How many new customers should you bring in every month, quarter, or year?
- How much does it cost you to get a new customer?
- What is the 5-year value of your customer?
- What level of customer "churn" is acceptable?
- Which of your customers are the most profitable?
- Which of your customers are the least profitable (or unprofitable)?
Every business will have a different answer to each of these questions.
It's All About Customers… and Profitability
Peter Drucker said:
"The purpose of business is to create and keep a customer."
Here's a fun exercise that will only take about 2 minutes. On a scale of 1 to 10 (where 1 is awful and 10 is fantastic), how well does your company:
- Get new customers… profitably?
- Keep customers… profitably?
Write down your answers real quick.
Your answers will tell you where to focus more attention over the next three months.
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