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In your business, or even in your personal life, what’s your retention level like?  Do you collect people or trade them.  For businesses it is an important distinction.

I look at my client list and see people who have been with me for years. I get 10 new subscribers for every 1 who unsubscribes. And usually an unsubscribe comes with an explanation as to why.  I’m very proud of that because it means people want to stay connected with me.  If those stats changed I would be deeply concerned as to what I was doing wrong.

Businesses often refer to clients coming and  going as “churn” and it is just considered a part of doing business.  Clients come and go and that behaviour is just accepted or expected.

I believe that we don’t take enough notice of why people come and go in most businesses to our detriment.

You see keeping a client “costs” a fraction of what it costs to get a new one.  And it doesn’t matter whether you are a car salesman, cafe owner or a sports club, keeping clients should be your number 1 priority.

In the personal development industry for example if you add up the costs of seminars, print advertising etc. etc. your “cost of acquisition” to obtain a new client might be anything from $10 to $500.  The cost of keeping that client and the value they add to your business is immeasurable.

So lets say you’re a small business with 100 clients and they cost you on average $100 to acquire.  And they spend on average $1000 per year with you.  That means your current client list is worth around $10,000.  And you get a return on your initial investment of  900%.

Generally new clients are higher maintenance and lower profit margin until you have them “trained” so the 2nd and 3rd year of having them are the most profitable.

So if you keep 100% of your clients you have locked in 100K income at no ongoing cost.  This gives you the ability to spend money keeping those clients happy and making them even more loyal. The fruit of that typically is word of mouth advertising which adds to your client base with no cost of acquisition.

However most businesses don’t even know what their retention rate is and often they churn as much as 50% of their clients annually. This means they have to constantly spend money on new client acquisition and they never exit the new client low margin profit cycle.  In fact their whole business ends up structured around constant client change.  This is both inefficient and incredibly profit sapping.

My favourite example recently of this is a cafe I visited that wouldn’t let me pay for my food without me giving them a business card.  The next day I started receiving emails telling me the daily special and anything else interesting about the menu.

That cafe is full everyday. In fact you can’t get a seat if you arrive after 12.  Because they send a 50 word email daily to their clients they have almost 100% client retention.  But more than that they are insanely profitable too because they serve exactly what people want. By rotating the specials and tracking the number of orders they build up a picture very quickly and basically for free of exactly what their regulars want to eat. So they give their clients what they want!!  Result no food left over, no waste = increased profits.

And because they are making a smaller selection of food because they know what their clients want, they need less staff to prepare and can buy fewer ingredients in larger quantities to drive production costs down!!

DO you get the power in this. All for the “cost” of a daily email this cafe is making a killing in a recession and in an industry that is considered very high churn this company has almost perfect client retention.  Imagine what YOU could do in YOUR business if YOU kept all YOUR clients!!

Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv

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