Author’s note: I need to be clear about my use of the term “riches.” The road to riches is via providing overwhelming value. Customers give you excess profit when you deserve it. No shortcuts.
Why do most small businesses pursue the path of least compensation?
You and I got into business to make money. Sure, we want fulfillment, independence, a sense of pride in what we do. We want to be useful. We want to bring others along with us. But with those things in place, more money would be better, yes?
So why do most small businesses focus on low-value transactions instead of high-value relationships?
Here’s what I mean: most small businesses want more market share. So they cast a wide net. That wide net represents innumerable customer personas, each with different needs and wants. Unable to focus on an ideal customer persona (or two, or three), we take whatever we can get.
The result: we get stuck competing on price.
And when we compete on price, we fill our book with customers who will leave us over price. That’s the intent they came to us with, and that’s the intent they’ll leave us for. It’s like clockwork.
But your book has a ton of intel about what really sets you apart.
Here’s How To Get The Intel.
Ready for a life-altering experiment?
Step 1: List your customers with their annual premium.
- Column A: Customers
- Column B: Annual Premium
- Remove duplicate customers. It will take you about 20 minutes.
Step 2: Calculate each customer’s profitability.
- Divide your total annual expenses by the number of customers.
- Eg., $175,000 / 1000 customers = $175 per customer.
- Column C: Subtract that amount from each customer’s annual premium.
- We’ll call that column “Per Customer Profit”.
Step 3: Get the total for Column C.
- That’s roughly your annual Net Income.
Step 4: Look at the top 5% of customers by Per Customer Profit.
- Total their Per Customer Profit.
- Divide that number by your Net Income.
That’s Your Magic Number!
Say that number is .38. That means 5% of your customers provide 38% of your Net Income.
I’m going to guess that the top 5% of your customers are providing 30-40% of your Net Income.
I’m also going to guess that you’re too busy to engage with them. That’s got to change, because…
Those Customers Will Unlock Your Niche.
What are you doing that’s working for those customers?
If you’re not sure, start spending a lot more time with them. Observe them in their natural environment. Ask them questions. Figure out why they’re staying with you for so long and giving you so much of their business.
Then what do you do?
1. Maximize value to those customers.
Don’t lose those people. They’re the ones who are stacking revenue for you to keep your business going. Be sure you have a strategy around retaining and growing these accounts.
2. Offer to provide that value to the people they know.
What better way to prospect than to start with the people your ideal customers love and care about. Family members. Church friends. Colleages. Don’t ask for referrals. Ask for introductions and offer to serve.
3. Provide that same value to your other customers.
It won’t happen overnight, but each time you meet with your customers, you have a chance to help them consume more value from you. They’ll move closer to joining your ideal customer profile.
4. Keep prospecting
You still want to attract and acquire new, single-line policy holders.
But don’t stop there! It costs money to acquire a customer. Now that you have them, what are you going to do to help get the maximum benefit from your business?
- If you find your niche, you’ll unlock massive profitability.
- Discover your niche by talking with your most valuable customers.
- Figure out how to maximize value to your niche.
- Figure out how to get introduced to and provide value to their people.
- Create a strategy for meeting with other customers and guiding them into your niche.