I read with great interest Sandeep’s blog about value creation for business. What he says makes perfect sense. While there are several areas of a business that will always demand your focus, keeping your eye firmly on the three major ones should result in a business that is both profitable and growth orientated.
To create value via new or existing clients seems obvious. This is sales – the lifeblood of any business. However, this alone is not enough. We all know the cost to integrate new clients into your business is high. Retaining your clients, by providing great service and ongoing value, is always the best strategy – the bird in the hand and all.
The cost to serve these clients is equally as important, and probably the most difficult to measure on an ongoing basis, particularly in a services business. While there will always be ebbs and flows in client work, identifying those clients who ultimately cost you money can lead to two big breakthroughs – you either rescope and charge more, or you break up.
Clients that really value what you do for them, and your relationship, will usually agree to pay what your service is truly worth, especially once it has been clearly explained.
It is important in all three of these areas, sales, cost to serve and client retention, that you make clear one overriding principle – your purpose.
If you clearly define why your business exists, and what you stand for, you should attract clients who not only believe in your purpose, but support it.
And if you are truly delivering on it, then clients will stay – why would they leave?
If you continue to deliver to clients that trust and support you, then your costs should not have to increase significantly outside of any new client brief that may come your way – which you can then scope accordingly.
For example, our business purpose at No More Practice is to make the pension irrelevant. We create education that helps advisers, accountants and brokers become better educated and informed, which in turn allows them to better serve their clients.
We also help consumers understand investing and how to think long-term about their financial futures. We know by creating entertaining, educational and personalised content from some of the best fund managers in the country, we are helping them become better equipped to make financial decisions that can make the pension irrelevant to their financial futures.
Whenever we are adding value and our partners and clients understand our purpose, we are growing a value chain that does not suffer from detrimental churn or a cost to serve that is too high.
When looking at your own business and the three key indicators that will create long term value, don’t forget to ask yourself whether you and your clients understand and connect with your purpose. Chances are if they answer is ‘yes’, you will continue to create a business of long-term value. If not, then identifying and communicating your purpose could be the smartest investment you can make to create long-term value.
