How To Increase Business Among Existing Clients
There are few businesspeople that would claim that landing a client is easy. In many organizations, signing on a new customer calls for a miniature celebration—or at least high five’s all around. In today’s economy, new business may be harder to come by, rendering a company’s existing client roster all the more valuable.
While existing customers, too, have budgetary concerns, an established relationship with them makes it easier to pursue other opportunities. By employing a bit of strategy, you can transform your client base into a source of recurring revenue.
“The benefits are very clear with recurring revenue, because you have a predictable revenue stream,”
said Bob Prosen, president of The Prosen Center for Business Advancement in Dallas, TX, and author of Kiss Theory Good Bye: Five Ways to Get Extraordinary Results in Any Company. “More importantly, your customer knows their fixed costs, which allows them to budget also.”
Recurring revenue can be generated in a couple of ways, the most common being the sale of an ongoing service, such as maintenance, that is billed regularly. Another method is to expand the share of an existing client. To achieve this, Prosen advises businesses to analyze their top customers and pose this question: out of all of the services that you offer, how many are your top clients currently using? “You might be surprised to see that they’re not using anywhere near your full portfolio of services,” he said. “Since they are already an existing customer, and they already like you because you are providing them with good service, it’s a lot easier to explain to them how these additional services would also be of benefit.” The cost of the sale is lower and the client is already familiar with you, making this endeavor too important to overlook.
Buzz Delano, president of Delano Associates in San Clemente, CA, urges contractors to sell a service and support program as part of the overall design package. Not only does this fulfill the goal of generating recurring revenue, it also enables the contractor to maintain regular contact with the customer. “It’s a comfortable way to keep clients informed about new technology or upgrades to existing technology,” he said. “It keeps the system current, and sometimes it provides the client with the opportunity to say, ‘We like how everything is working, but we’ve got a new idea.’”
Selling ongoing service and maintenance contracts isn’t a matter of simply making a pitch: if you intend to launch this service, it’s critical to have your ducks in a row. “Contractors have got to have a really well organized, efficient business to do this,” Delano said. “If you put yourself in a position where you are going to charge for an ongoing service and support program, you had better be able to fulfill that really well. The first moment that a client senses that you are not providing this support, they will question your integrity.”
This requires a detailed assessment of your infrastructure, and what needs to be implemented in order for the service to work—otherwise, you risk this potential profit stream costing you more than it’s worth. Some companies have their own call-in centers, whereas others outsource this service. Regular billing demands that an appropriate accounting structure is in place, and contractors should consult with their accountants, financial advisors, and business counselors to lay out exactly what these contracts will include, and how the back-end systems will operate.
While existing clients offer considerable recurring revenue potential, the possibility of developing an ongoing relationship with new clients should be established during the first few meetings. The best way to lay this foundation, according to Prosen, is to take the time to get to know your client’s business, and this requires contractors to focus less on specific products and services, and more on the big picture. “The customer is not truly buying that product or service; they’re buying the benefits it gives them,” he said. “The more you understand how the customer thinks and is anticipating the application of your product and service, the better you know their business, their needs and the deeper your relationship becomes.” While they may opt for a barebones installation initially, by gaining an understanding of the customer’s entire organization, contractors lay the groundwork for suggesting other solutions, upgrades and services along the way.
Jeff Pallin, principal at Thatcher Business Solutions in Foster City, CA, also emphasizes that contractors need to focus more on service and less on product. There are a considerable number of services that contractors already bundle around the ‘box,’ including a warranty that lasts for a certain period of time. “What happens is, the client doesn’t value them at all because there is no price on it, whether they pay it or not,” he said. At the end of the warranty period, the contractor may approach the client about signing a maintenance contract, but it’s a tough sale. “Since there wasn’t any value placed on what it was they weren’t paying for, when it comes time to sell the service contract, you’re climbing Mount Everest again.”
To counter this, Pallin suggests that contractors put a price tag on everything, even if they intend to include some services free of charge as part of the installation. “When you make the proposal, examine how many line items are not being charged for that you could place a value on, and then state, ‘included as part of the first-year warranty’— however you word it—so that the client sees that there are all of these things that you will do free of charge in consideration of the first year’s purchase,” he illustrated. “Then, a year later, you can say, ‘You got all of these things for free. The first year is over; now we need to talk about continuing service.’”
Carolyn Heinze (carolynheinze.blogspot. com) is a freelance writer/editor.