Welcome to this week’s Profit Tip where we bring you real-world ways to Build-Grow-Manage-Profit from your business. My goal is that you earn at least $1,000 an hour for every hour you spend learning and applying our profit strategies.
Years back I acquired a company that was co-managed by two fascinating entrepreneurs, Jessie and Rohit. While we were over-focused on getting new clients, they were focused on first maximizing the revenue of every client. Their goal was to fill every client need they were qualified to fill. And the results spoke for themselves. They were by far the most profitable division we had, and this fact caused me to pay close attention.
You see, they learned that getting new clients was extremely difficult in the competitive arena of technology. They also learned that they could penetrate deeply and expand into many more opportunities within these same clients, building stronger relationships, had more opportunities and actually became harder to replace.
In their case, they used this strategy to dramatically, and I mean dramatically, increase revenue per client. As an example, they landed a large telecommunications client (namely due to confidentiality) with a small $10,000 strategy job. Rather than send in their $90 an hour consultants (as the bid provided for) they staffed it with a $225 an hour stud (at the same price). This brilliant move ensured the client was delighted and it also enabled the stud to "ask around" and identify other projects that were coming up.
Turning $10,000 into $26,000,000 Methodically
The result? The $10,000 job turned into over $1M per month, for 26 months! That is $26,000,000 for a $10,000 job!
The key is focusing on meeting more of the needs of your customers. It is about:
- Understanding the client’s needs
- Understanding how you (and a joint partner if needed) can meet their needs
- Building relationships with multiple decision makers
- Maintaining "stealth insider info" so you know what they are buying and from whom (and it will be you if you focus on this strategy)
Mushrooming applies to many types of businesses & perhaps all.
- If you are a chiropractor it means understanding all their health issues and nutritional issues so you can meet more needs, and understanding their family’s needs as well
- If you are a parts supplier to major corporations, it means finding other purchasing agents that are not buying from you – both within that physical division and other divisions/locations
- If you are a duck producer it means getting out and visiting your customers to verify you are the sole supplier… and if not, what you must do to be that
- If you are a specialty item company that sells into large retail chains, it means learning what other items the same buyers that trust you need/sell so you can create it or partner with someone that would die to have those relationships
- If you are a rug cleaning company it means learning about their needs for rug cleaning, repair, furniture cleaning, padding, and perhaps even other household cleaning needs
Protects Your Market and Margins
In Jessie and Rohit’s business, the strong presence in these accounts often meant they had little price pressure. Why? They were trusted, reliable, and fair. So margins were awesome!
I used this same "mushrooming" strategy to protect my market share in my national medical record company. What started as a new concept developed by two of us quickly became a field of 1600 competitors, all who looked and sounded the same… sound familiar?
So, to protect ourselves, we mushroomed deeper by developing other services our hospital clients needed. This made it more difficult for the competitors to duplicate our offerings and it entrenched us more solidly in the hospitals we were in. We continued this year after year, which I am confident, was a big part of our remarkable 94.2% client retention rate over 8 years.
To your success,
Scott D Hallman