How To Build Recurring Revenue

The best people to REALLY tell you how well your business is performing is your customers, so it makes sense to ask them. The big question is HOW do you ask them? The first question I always ask is this, "What do you want to hear, what you want to, or what you NEED to". Everyone then answers, "what they NEED to", and continue to conduct surveys that deliver only what they WANT to hear. Nuts, or nuts? The thing is us humans are not great at telling the truth when asked, so we default to the "won't upset anyone" answer. This is why 99.8764376% (approximately) of surveys are either i) a waste of time, or ii) just annoying. Here's the proof. You're in a restaurant and have just had a completely underwhelming meal with mediocre service at best. "Was everything OK for you" comes the text book question, quickly followed by the textbook reply... "yes, fine thanks" You LEAVE the establishment vowing never to return, a loss for you and the restaurant. You have also done the owner a massive DIS SERVICE by not alerting them to their failings and giving them the opportunity to correct it. You won't tell the truth on the night, however, oh my god, did you leave them a REVIEW !!!! This is " Restaurant Feedback Syndrome " - I just made that up, so don't Google it. When you send a "Customer Survey" that comes from YOU, then you are asking, "was your meal okay this evening?" - expect the majority to either ignore you are say "fine". You can now pat yourself on the back that 99.6% of your customers are delighted, without realising who are leaving you, or why. This is where the Net Promoter Score is a game changer. NPS works by asking ONE key question, and that question is this. "On a score of 0-10, how likely are you to refer ABC Widgets Ltd to a friend or colleague?". The answers then provide a NPS Score. Anyone who scores 0-6 are termed DETRACTORS . Those who score 7 or 8 are deemed PASSIVES , and those who score 9 or 10 are termed PROMOTERS . We then subtract the DETRACTORS from PROMOTERS, and ignore PASSIVES. Lets' say your score was this... 5% Detractors, 65% Passives and 30% Promoters. 30-5 = NPS of 25. That's OK, as the UK average is 20. Anything above 20 is good, above 50 is considered exceptional, and above 80 to be world class. The key with the Net Promoter Score is it's 100% confidential, and SEEN to be confidential, so you get accurate feedback that you can ACT on. When I do NPS for clients I do it through Value Builder which then provides full details of the score and answers, just not the customer info. If you're serious about conducting a GENUINE Customer Survey - it has to be NPS. NPS is a great predictor of compnay growth, so it makes sense to add that to your "to do list".

With most financial experts predicting a “ Challenging ” 2023, what does this mean for your business? How do you grow your business in a shrinking economy? Have you ever wondered why in challenging times some businesses seem to thrive, while others in the same industry simply struggle to pay rent? How do you thrive, not just survive? The first mistake many business owners make in challenging times is they reduce or stop marketing and advertising, the reality is, the opposite is true. This graphic illustrates why. In “normal” times the number of opportunities and businesses “chasing” them are balanced. As we enter challenging times the opportunities reduce, in this illustration by more than half. Panic, panic ? No. Look what happens to the number of businesses ACTIVELY chasing those opportunities, they have reduced substantially as the default reaction in a downturn is to cut back. The irony in this illustration is that there are MORE opportunities. Of course your advertising is just ONE part of your overall strategy in a shrinking economy. How well do you differentiate yourself from your competitors? Do NOT make it about price. People don't buy on price, they buy on VALUE. If you are the same as me, and I am the same as you, and we're both the same as them, then the customer WILL ultimately make that decision on price. However, if your business or product shines head and shoulders ABOVE your competition, then the sale is yours, possibly for more than your competitors. Make it easy for your customers to buy from you. Sounds obvious yeah? Businesses create “barriers” every day. Online offers advertised that don't take you DIRECT to the offer. Businesses that don't accept Amex, or indeed don't accept cards at all. Too many clicks on the website. Hidden costs and conditions. Look around your business, how can you make it easier for your customers to buy from you? As we enter 2023, don't let the media depress you, there ARE opportunities, they just aren't always obvious. Don't stop the marketing, differentiate, and make it easy for your customers to buy from you. Have a Prosperous and Profitable 2023.

Stop Selling Your Time If your goal is to build a more valuable company, stop selling your time. Billing by the hour or day means customers are renting your time rather than buying a result, which means that your business model lacks leverage. To grow, you need to either work harder or hire more people. Since it can take months to ramp up new employees, fast growth is just about impossible. One of the eight factors that acquirers look for in the businesses they invest in (or buy) is your company's Growth Potential. Simply put, they want to know how fast they could grow your business, and nothing diminishes your Growth Potential more than selling your time. Billing by the hour can also drag down your customer's satisfaction with your business — because customers dislike the feeling of being nickel and dimed. They know you’re incentivised to lengthen the time a project takes, while they want a solution in the shortest time. This misalignment leads to unhappy customers, which can destroy the value of your business. Peddling time also invites competition. When you sell your time, you allow customers to compare you with others offering the same service. This can lead to downward pricing pressure and lower margins as you become commoditised. How Likeable Media Stopped Selling Time Carrie and Dave Kerpen started Likeable Media, a social media agency, in 2006. Facebook was emerging as a dominant platform, and marketers were trying to figure out how to monetise users of their platform. The Kerpens started selling their time but quickly realised the limitations of an hourly billing model. They realised that customers didn't want to buy their time. Instead, Likeable customers wanted to buy social content. Marketers wanted a video they could post to their Facebook feed, or a blog post they could publish on their site. The Kerpens decided to switch from an hourly billing model to the Content Credit System. They assigned each piece of content several credits. For example, a tweet might be one credit, a written blog post might be ten, and a video might cost twenty credits. Customers signed up for an annual allotment of credits they could roll over month to month. The Content Credit System transformed Likeable Media for the better. To begin with, customers were no longer buying time. Instead, they were happy to pay for tangible output rather than trying to scrutinise an hourly bill. The credits also made it easier for Likeable's Account Managers to upsell customers. They no longer needed to justify why a particular project would take more time. Instead, they suggested that customers buy more credits if they needed more content. The Kerpens’ innovative billing approach also created recurring revenue because The Content Credit System relied on annual contracts renewed each year. The Content Credit System also transformed Likeable's cash flow because customers paid for their credits upfront. Most importantly, the Content Credit System enabled the Kerpens to stop selling their time and build a team. By 2020, Likeable was up to more than 50 full-time employees when they caught the attention of 10Pearls, a digital strategy company which acquired Likeable Media for 8.5 times EBITDA, a healthy premium over a typical marketing agency. The bottom line? If your goal is to grow a more valuable company, stop selling your time and start selling your customers' results. Obvious right… yet few see it… fewer DO IT.

Would you agree that finding and RETAINING the RIGHT people is vital for your business? Try this simple system and score your team out of 10 for each. Score YOURSELF too... Aptitude: How good are they in their role, their skill level if you like. Are they the "Yoda" of your industry, or the "Yawn"? Attitude: How many of your team share your vision and strive to achieve the highest possible standards - or are they just there for a pay check at the end of the month? Or worse, do they actively disrupt you and others within the business? Acceptance: Are they ready to accept responsibility, learn new stuff continually, push boundaries, and accept that there's so much more to learn? They want to be better today than they were yesterday? When you have high flyers scoring 25+ then you are on your way to building a team of EXCEPTIONAL standards. It is CRIMINAL for any business to lose those team members. On the other hand, if you have team members scoring low overall, or in Attitude - are they the right people to take your business where it NEEDS to go? Hire on ATTITUDE, you can train Aptitude.

How Your Greatest Strength Becomes Your Weakness What’s your greatest strength as a CEO or Business Owners? Sales? Marketing? Operations? Whatever you do well, know that it might become your Achilles’ heel. As owners, we tend to invest in areas where we know we’re weak. We know we have limited resources, so we spend what we have on backstopping the places where we’re most vulnerable. This tendency leads many founders to under-invest in areas where they have natural strength. Two of the most common functions are sales and marketing. Most owners are decent salespeople, so they figure they can compensate for a weakness in generating revenue through force of personality and sheer will. But determination only goes so far, and you may reach a plateau where your greatest strength becomes what’s holding you back. How Gold Medal Service Got Stuck at £700,000 Mike Agugliaro is an electrician by training and a natural salesman in practice. He’s a gifted speaker, and his warm personality makes him a magnet for customers. When he started Gold Medal Service with his partner Rob Zadotti, they didn’t invest much in sales and marketing. When Agugliaro was interviewed on the Built to Sell Radio podcast, he admitted the extent of their marketing in their first decade of operations was pinning a business card on the corkboard of the local coffee shop. Over 12 years, the business grew slowly to around £700,000 in revenue, which was when Zadotti announced he was leaving. The news made Agugliaro re-evaluate what they had been doing. He realized they had been massively under-investing in sales and marketing. Agugliaro convinced his partner to stay, and together they started investing heavily in sales and marketing. At the time, the yellow pages were still the primary way homeowners found service providers, so they invested in a double-page spread. They tried radio, fliers, and just about any marketing technique they could measure. Then the partners started to think of their vans as giant rolling billboards, mobile leaflets if you like. Agugliaro’s wife did some research and discovered that humans are hardwired to notice the colour yellow. Agugliaro and his wife reasoned that humans must have evolved to avoid bees, so they added black lettering. Gold Medal’s vans were bright yellow and black and became a mainstay on the local and not so local streets. The investments in marketing paid off, and Gold Medal went from £700,000 in revenue in 2004 to a whopping £32 million in sales by 2017 . Months later, Sun Capital acquired Gold Medal for a significant premium over the 5 x EBITDA multiple typical of the home services industry. The takeaway? Your greatest strength can help you start a business. Still, at some point, you may be tempted to underinvest in your strengths, which is when they switch from your most significant assets to a hidden liability. As your business grows, you may need to invest in areas you never considered necessary in the past.

How many people can one person manage? Harvard Business Review estimates the ideal range for an experienced manager is between five and nine direct reports. and pegs the sweet spot at seven. The ratio of managers to direct reports matters because it explains why some companies grow and others plateau. Every business is different, but you can loosely think of a company’s evolution as a series of stages with an invisible gate holding most owners from progressing to the next stage: Stage 1: Doers (up to 9 employees) In stage 1, you direct a handful of doers. You need people who can follow your standard operating procedures and execute. Grab a free copy of the eBook: The Definitive Guide to Standard Operating Procedures. Your best employees will often be generalists who can do a lot of things reasonably well. They thrive on variety and like the feeling of getting things done. Many owners get stuck in stage 1 because they fear delegation. Owners don’t trust employees enough to do the work without their direct oversight. However, those owners courageous enough to hire some managers will graduate to stage 2. Stage 2: Managers (10–40 employees) In a Stage 2 company, the owner hires a small number of managers (usually less than five), who are paid to ensure their direct reports execute. The emphasis is on managing against the plan the owner gives them. Good managers understand the process they are being asked to manage. They are detail-oriented and stick to the plan. While managers may contribute to the plan, they are not usually responsible for creating it. Managers typically need their leader(s) to supply their plan, which is why many companies stall out at stage 2. Stage 3: Leaders (40 + employees) For our purposes here, let’s define a leader as a person who can lead a team through more than one layer of management. Let’s imagine you have a sales leader who oversees two sales managers, each of whom has five salespeople reporting to them. The leader’s job is to set direction and to provide a vision and plan for their managers to execute. They are leading a team of twelve (two managers plus ten salespeople) while simultaneously managing two direct reports. While most leaders can manage, the opposite is not necessarily true. Leadership requires managers to learn a new set of skills. Leaders need to be able to communicate clearly, delegate effectively, and create strategy. If you’re stuck at stage 2, you have two options: either you need to hire leaders to parachute into your organization, which risks alienating your managers, or train managers to become leaders. Both strategies are hard and time-consuming, which is why many companies get stuck at stage 2. Half Your People, Half Your Processes For an example of a company that successfully managed the transition to stage 3, take a look at Acceleration Partners. Started by Robert Glazer in 2007, Acceleration Partners is an agency specialising in partner marketing. Acceleration Partners is a people-centric business that helps brands reach and manage their influencer relationships. In the beginning, Glazer began hiring people to help him manage clients and their projects. “Every time your company doubles in size, you outgrow half your people and half your processes.” Glazer grew Acceleration Partners for 14 years, and by the time he sold it in 2021, Glazer had an entire team of leaders overseeing a group of managers who were managing the people doing the work. If you’re stuck, it’s worth asking if you have the right people in place to take your business to the next stage. In the beginning, you will need managers you can trust. And to graduate to stage 3, you’ll need people who can manage and lead. Some managers may need training, while other areas of your business may need an entirely new leader to make the transition successful. Find out how you score on the eight factors that drive your company’s value by completing the Value Builder questionnaire. We call them the "Eight DRIVERS" Get Your Value Builder Score (and Business Valuation) here .

The new season is a great reason to make and keep resolutions. Whether it’s eating well or cleaning out the garage, here are some tips for making and keeping resolutions.

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