Chartered Management Accountants for the West Midlands, Shropshire and Worcestershire

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Grow Your Business - 2005- Issue 11

Surveys Show What Your Customers Dislike
Look Good To Lenders
Acquiring And Managing Leads
Upgrades Are A Part Of Life

Surveys Show What Your Customers Dislike

Surveys of customers can be very revealing even indicating danger areas for your organisation. This article summarises findings from some recent surveys that show just what it is that customers dislike the most about their interactions with businesses.

When they’re on the premises

There’s one thing that customers dislike more than anything else – employees who are busily conversing with each other and just ignore them. This is unforgivable and also very likely to cost the business a sale because the customer usually leaves and takes their business elsewhere.

Whether the business is a retailer or a restaurant, customers intensely dislike being confronted by a salesperson who’s having a bad day and showing it. The customer’s perception of the business plummets and most never return, even after just one such experience.

Another real dislike is to be served by someone who’s chewing gum or eating something. It’s unattractive at best and reflects poorly on the business. Even breath mints should be sucked only while out of view of customers.

The use of industry jargon is viewed as being condescending and a means of trying to make the customer look stupid or uninformed. It intimidates all but the most knowledgeable of customers and should be avoided unless the customer has already asked a question using a particular ‘buzz phrase’.

Telephone troubles

Customers really dislike being put on hold during a call without being asked first – just telling them “Hold a minute please” and then transferring to the on-hold music is not the right way to handle it. The best way to deal with this situation is to ask the customer if they mind waiting for a few seconds while the other call is answered, then promise them that you’ll be back quickly. It’s also very much disliked when the person they have reached goes away to take another call and doesn’t return for several minutes.

Regardless of how polite the employee is when putting a customer on hold, it should only happen once. Going away repeatedly to take other calls is seen as rude and a sign that the customer is not valued by the business. Asking the customer to call back later “when we’re not so busy” is another definite turn-off. Instead, ask when it would be convenient for you to call the customer back, and then take down their contact details.

Even customers who start by telling you they have rung to complain about something, or who are obviously irate and aggressive, don’t deserve to be hung up on – they are only going to be twice as irate when they call back to complain about that as well!

One of the important things a team member, particularly those who deal with customers on a regular basis, should be trained in is a telephone technique for how to handle difficult customers.

Customers also dislike the feeling that they’re being ‘screened’. If they ask to speak with the CEO and that person’s not available then they should be advised that the CEO is out of the office and then asked by the person taking the call if he/she can be of assistance. The worst thing to do is to launch into a series of questions that sounds like the customer’s being evaluated to see if they’re worthy of being put through to the person they’ve asked for.

No reply

And finally, a customer dislike that’s right out of the electronic age. So many people use the Internet for gathering information that it’s become a highly valuable sales support channel. Many websites offer a facility for submitting requests for information and are thereby making a promise to supply it. According to one study, nearly half of online companies either don’t reply at all or respond with incorrect or inappropriate information.

It’s up to you and your managers to be sure none of these customer-killers are happening in your place of business. Remember that only about ten percent of dissatisfied customers will ever complain to you – but they’ll tell everyone they know about why they’re unhappy with your business.

Look Good To Lenders

Businesses borrow money for a number of reasons. Additional capital may be needed to increase production capacity or to open a new retail outlet. It might be necessary to borrow to expand overseas or to upgrade the business’ IT facilities.

Whatever the reason, borrowing money involves the need to favourably impress the lenders you are approaching for finance. There’s never a guarantee that they will support your proposal, but there are some preliminary steps you can take to make a more convincing case to them.

Have all the necessary paperwork ready

Getting ready to apply for a loan is a lot like getting ready to sell a business. You’ll need to put together at least three years of financials including tax returns, financial statements, and lists of current payables and receivables. If the money is being borrowed to capitalise on an opportunity that will require the business to make significant investments, be prepared to present a comprehensive business plan that incorporates a model illustrating the projected results of making the investments.

How do your receivables and payables look?

Lenders like to see a business that gets its cash in quickly and doesn’t allow its accounts receivables to age beyond a reasonable period. Good businesses keep their cash flow under control by aggressively pursuing accounts receivable so they can pay their own creditors and take advantage of discount opportunities.

What are your major assets valued at?

Saleable assets are what a lender will look at to gain an idea of how much could be realised if the business has to be liquidated. Have an up-to-date list of all assets owned by the business and be able to show how they were paid for or how they have been financed.

Current and accurate valuations for all major capital equipment will need to be provided. These should be prepared by a third party that can give an independent estimate of their current value; what the business paid for something isn’t necessarily a guide to its present worth when depreciation is taken into account.

What is your current loan-to-value ratio?

Lenders will loan different amounts to same-sized businesses in different industries. A high-tech business with £5 million worth of rapidly depreciating computer equipment will be viewed differently from a manufacturing business with £5 million worth of production machinery with many years of service life left in it.

You should have a pretty good idea of the amount you’re likely to be able to borrow before you approach a lender. If the amount is seen as ‘excessive’ because of the industry you’re in you may have to offer some of your personal assets as security for the loan.

What is your debt-to-income ratio?

Lenders know that loans must be paid back out of the profits of a business. Making loan repayments out of gross income can easily lead to cash flow shortages if the business isn’t suitably profitable. If the repayments are going to require too high a portion of the business’ profits it can also lead to problems.

A debt-to-income ratio of less than 50% is the norm, but less than 40% is preferable. This means that a business with monthly profits of £5000 should have no more than £2000 per month in repayments.

Both principal & interest repayments need to be covered

You’ll have to be able to show that the business can afford to make the loan repayments on top of covering all its regular expenses. This includes both the loan interest and a portion of the principal, depending on the duration of the loan.

When you prepare your case for any lender, keep all the above in mind. Get the business and your paperwork ready for the exercise; have a rough idea of how much your business is worth and of the amount you’ll realistically be able to borrow.

Acquiring And Managing Leads

The process of gaining new customers can be summed up in two steps - ‘getting leads’ and ‘converting leads to customers’. Although the first step is the responsibility of marketing and the second is the responsibility of the sales function, the two have to work together to optimise their effectiveness.

Generating the leads themselves is always the first task of any successful marketing exercise. Leads can be purchased, as in buying a mailing list of prospects, but gaining your own isn’t difficult. Just know that you should be prepared to use a variety of ways to attract qualified prospects rather than depending on just one source.

Promote yourself and manage inquiries – Think about how some companies are always announcing the results of a market study or survey. They get a lot of airtime and press space and are perceived as being experts in their area of operations. You can conduct your own survey and publicise the results, becoming an ‘instant expert’ in your own industry.

Team up with an affiliate – Find a business that’s not a direct competitor but whose customer base represents a list of good prospects for your own firm. Exchange mailing lists or do a joint promotion to both groups of customers and create a campaign that specifically targets them.

Create articles for other companies’ newsletters and websites – If you can come up with something really interesting that others will publish it’s like gaining their recommendation for your business.

There are literally thousands of newsletters and websites that are happy to receive high quality, useful content for their readers.

Do your research - media like daily newspapers, Internet blogs, newsgroups and websites where people can post queries are great places to look for people who might be interested in your products. They’re also good sources of business intelligence about developments in the marketplace that might provide opportunities to open up new markets for your products or services.

Get out and be seen – Trade shows and exhibitions are surprisingly undervalued, but mainly because so many exhibitors aren’t good at following up the leads they get from them. They’re always a good way to meet seriously interested prospects, especially for B2B marketers.

Regardless of how they’re acquired, one of the most critical areas in any business is managing theleads that come in. Unfortunately, because a lot of good leads don’t respond immediately to sales efforts they aren’t pursued long enough, even though in time they may have become customers.

One way to cope with this situation is to create a follow up system that will automatically contact leads at designated intervals, perhaps by email or by sending them a piece of print material created to reflect their area of interest. If all leads are followed up for a set period of time it keeps them ‘warm’ until the sales process finally closes them.

This type of follow up is especially useful for leads gained at large scale events like trade shows. The process can commence immediately after the event and then be maintained by some form of contact on a regular basis – perhaps weekly or bi-monthly.

To begin designing such a follow up system go back over your previous sales records and answer these questions:

How many contacts did it take before a sale resulted?

What was the frequency of contact with those customers where the sale was finally closed?

What kind of contact method proved the most effective?

How long did it take before the lead was converted to a customer?

What percentage of leads became customers?

This information will guide you in creating the system so that you can determine such aspects as the type and frequency of contact and what kind of results you should expect.

Gaining leads and then following them up are all part of the overall job of staying in business. Get the two working together and you’ll have a much better chance of success than if you let them function independently.

Upgrades Are A Part Of Life

Anyone with a PC will be familiar with the term ‘upgrade’. It seems like there’s a new version of Windows almost every year, and unless we do constantly upgrade our computers it’s likely their operating systems will rapidly become inadequate to the demands of new software and hardware.

To remain competitive, businesses need to upgrade everything from their computer setups to their motor vehicles. There are ways to approach upgrading that will help keep costs down and increase the value received.

Compare new vs. used

Before committing to a purchase be sure to compare the costs of new, against used items. It’s usually not a good idea to buy second hand high tech items like computers and photocopiers unless you’re sure they’re suitable for your requirements and you get an ironclad guarantee. Even then, the pace of change means you’re probably buying something that’s already outdated.

For items that aren’t as affected by technological developments, like office furniture and delivery vehicles, something that’s ‘pre-loved’ means that someone else has taken the hit of depreciation and that’s what you’ll be saving.

Upgrade to meet a need

Upgrade only if you’re certain you have a need for it. This means looking carefully at what you want to achieve and ascertaining that upgrading is really the best way to go. An example of this would be when a factory gets an order for a production run that will require extra capacity for two or three months. Rather than invest in the machinery to meet the extra demand, the best way to cope with the situation could be to subcontract out a portion of the work.

Don’t upgrade for the short term

Upgrades should do more than just bring you up-to-date; they should place you in a better position for the future. Study the options for upgrading and be sure to consider which ones won’t be quickly outdated by advances in technology or changes to the marketplace you service. It’s not good value to upgrade ‘on the cheap’ if it only means you’ll have to upgrade again in the near future.

Look for offsets when you upgrade

Do a comprehensive cost benefit analysis of every upgrade being considered. Acquiring new technology should quantifiably improve productivity or lead to greater sales. Adopt a strategy of spending money only to reduce costs or to increase revenues and make that part of every upgrading consideration.

People can be upgraded too

Sometimes the acquisition of upgraded equipment also requires upgrading the skills of your employees. The costs of this should be taken into account when calculating the total costs of upgrading. It’s also worthwhile to consider regularly upgrading your team members’ skills to keep them current and to develop any potential they may have for future utilisation.

Promote your upgrades

Your current customers will certainly appreciate being advised of any upgrades you make, and it can help to justify future price increases. Upgrading is also a good ‘hook’ to promote your business to prospective customers - having the latest equipment has positive connotations about your technological awareness and willingness to invest to achieve high quality output.

Regular Pieces

How To Make The Most Of Your Newsletter

Be sure to read each article with the mindset ‘How could this apply to our business.’ Thinking of it that way will guarantee that you get value. Better yet, take notes as you read and commit to having the ideas implemented by the time the next edition arrives. Also, make copies for each team member. To really make sure something positive happens, work with your business development specialist to talk your team through the ideas and how to set a schedule for getting them implemented. We’re here to help you get started.

Memorable Quotation

“I notice increasing reluctance on the part of marketing executives to use judgment; they are coming to rely too much on research, and they use it as a drunkard uses a lamp post - for support, rather than for illumination.” - David Ogilvy

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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