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The franchisee thought I was crazy, insensitive or both when I told him:
“Quick, lock your front door and don’t let anyone else in because every time a customer walks through your door they leave with $90 of your money. . . . You can’t afford that! . . . . You’re losing money with every customer and going out of business and you don’t even know it. . . . Quick! Lock the door!”
Advice was right on the money
That’s not what a client wants to hear. And yet, I was right on the money. This franchisee (and hundreds of others like him in the same brand-name network) were losing money each time a new customer came into their stores.
And, incredibly, they didn’t know it!
No one told them about these metrics
They didn’t know it because they didn’t know:
- The cost of acquiring a new customer
- How much the average customer spent when visiting the store
- How often the average customer returned to the store
- When the customer would return again: 2 days? 2 weeks?
- The value of the customer
- And so much more!
No wonder they were going out of business
So much more that’s absolutely essential if you are going to build a satisfying and profitable business.
How can anyone not know these numbers?
Shouldn’t franchisors teach franchisees these metrics?
And yet, most small business operators do not know them. Most franchisors do not know them, either! (Which is a big part of the reason why franchisees don’t know them).
It’s a critical mistake, especially these days, and it’s one of the major reasons for business failure.
If you don’t know the metrics I listed above, stop! Lock your doors. Close your business for a day. Really. You’ll be better off closing the business for a day and spending the time figuring out the answers to those all-important metrics.
One day without losing any money!
And imagine: For at least one day you won’t lose money every time someone comes into the store!
Once you study your metrics and get the answers you need, don’t be surprised to discover that it costs you more to acquire a customer than what the customer spends in your store or business!
$100 to collect $10 doesn’t make sense
My client referenced above discovered that it cost $100 to acquire a new customer who spent, on average, $10! And then only returned to the store 3 or 4 times in the next 90 days!
So that’s why I said, “Quick, lock the door. Each time a customer comes in they go out with $90 of your money. You can’t afford that!”
And could you blame me?
Bless the franchisor for immediately making changes
My hysterics got the franchisee’s attention and it got the franchisor’s attention, too! The franchisor invited me to educate the franchisees to do the following:
- Reduce the $100 to $50 (I worked with the franchisor’s marketing department on that issue)
- Increase the average spend, get it up to $15 (worked with operations on that issue)
- Get the customer to return 2 to 3 times every 10 days
- Focus on capturing better customers, the “right” customers
- Re-train existing customers to become better customers
The benefits were immediate for some franchisees
Franchisees who followed the plan — and not all of them did, amazingly! — reaped the benefits.
Generated more satisfaction and profit
But of course! How could they not? By tracking the metrics they changed the metrics and the results created a more satisfying and profitable business.
The franchisees got re-engaged in their business and by doing so they re-connected with the business in a way they didn’t think was possible. What had become drudgery suddenly became exciting!
A business they suddenly loved again
Suddenly the business wasn’t just a puzzle, but a puzzle they could solve. Suddenly the business became a mystery they could unravel and put back together. Suddenly they owned, they managed, they operated a challenging business, one that excited them and didn’t wear them down . . . which is what every business owner really wants.
Most business owners suffer because their business presents challenges they don’t want to face, challenges they can’t solve, challenges they don’t find interesting or exciting, challenges that they are not equipped to grapple with day to day.
And on top of that, the business loses money!
Isn’t it time to make a difference in your business?
You can change it all. Whether you’re a franchisor, a franchisee, or a supplier, you can turn your business — your franchisees’ businesses — into exciting, profit-producing enterprises just by studying and changing the metrics!
It’s worth doing because no one, for long, remains in a business that loses money. One way or another, they will lock the doors!
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Capture & Keep The Right CustomersIn today’s economy there is no more important task for a business than capturing and keeping customers — and not just any or all customers: only the right customers!
- Do you know who your “right” customers are?
- Do you know how to find more of them?
- Do you keep them coming back for more once you capture them?
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