The Client Retention System

System Four of six. Two of the three ways to make more money involve customers you already have. Most businesses ignore both of them.

Remember the three ways to increase sales?

Get new customers. Get existing customers to buy more often. Increase what they spend with you.

Here’s something that should blow your mind.

Two out of those three involve customers you already have.

And it gets better. It’s far cheaper to generate additional sales from existing customers than it is to drag in new ones.

Think about it. You already did the hard work. You attracted them. You sold them. They trust you.

So why the hell would you let them drift away?

What walking away costs you

Here’s what most businesses do instead. They make the sale, then disappear.

No follow-up. No relationship. Nothing.

Maybe they send a Christmas card. Maybe.

And then they wonder why customers don’t come back.

Most owners have a marketing budget and no retention budget at all, while the retention number is the larger of the two.

What a customer is actually worth

Every customer you have represents potential future sales. The total of all their purchases over time is what the smart guys call lifetime value.

Run yours.

Once you know that number, a lot of decisions get easier. What you’ll spend to win a client. What you’ll do to keep one. Whether that complaint is worth an argument.

And your goal? Keep them for life.

The twelve-month contact calendar

Let me ask you something.

What are you doing to stay in touch with your customers? Newsletter? Email? Cards? Phone calls?

Or are you just hoping they’ll remember you when they need you again?

Spoiler alert. They won’t.

In the book Referral of a Lifetime, the author lays out a twelve-month contact system that runs on autopilot. One month it’s a card. Next month, a newsletter. Then an educational piece. Then another sequence of similar touches.

All of it automated, so it happens without you having to think about it.

Twelve rows. Each row gets a month, a touch, a channel, and a name. The name isn’t yours.

Don’t get me wrong. Sending Christmas gifts is nice. When I visit a client’s office during the holidays, their kitchen table is piled high with popcorn, candy, grapefruit and other remembrances from vendors. Those thoughts are sincere and wonderful.

But think about having a relationship that runs deeper than fruitcake.

Become their trusted advisor

What if you stayed in touch so consistently, so helpfully, that you became more than just a vendor?

What if you became their counselor for their business?

My firm offers three levels of membership programs that provide ongoing advice. That advice ranges from legal counsel to acting as, essentially, an outside director. The guidance goes way beyond legal issues. We help with marketing. Strategy. Operations.

Why?

Simple. The more successful our clients are, the more successful we are.

It isn’t complicated.

Be worth talking about

Here’s a story a friend told me.

He’s walking through the Seattle airport when he hears a pleasant humming sound. He turns around and sees a Bose audio kiosk.

He’d been having trouble with his noise-canceling headphones. Loves those things, uses them on every flight.

Even though the salesperson is in the middle of closing a $300 sale with another customer, he greets my friend with a huge smile and says, “I’ll be right with you.”

The guy is obviously passionate about his product.

My friend explains the problem. The salesperson says, “It’s one of two things. Let me run a quick test.”

Three minutes later, the salesperson returns with a brand new, fully charged set of headphones. He registers them online and tests them with an iPod before my friend even leaves the kiosk.

Total time: maybe ten minutes. Cost to Bose: whatever those headphones cost them wholesale.

Result? My friend is a raving fan for life.

You think he told anyone about that? You think he’ll ever buy another brand?

Not a chance.

Now write down your own version. One moment in your delivery where you could do something a customer would repeat out loud, and what it costs you. Then decide whether the cost is really a cost or the cheapest marketing you’ll ever buy.

The churn autopsy

Pull five customers who used to buy from you and stopped.

Not the ones who blew up and left angry. The quiet ones. The ones who just faded.

For each, write down when they stopped, what the last interaction was, and whether anybody noticed at the time.

That last column is usually blank, and blank is the finding. Customers rarely fire you. They just stop calling, and nobody in your business is responsible for noticing.

Then pick three and win them back. A phone call, from a person, with a real reason to call. Not a promotion. A reason.

Win-backs close at rates that would embarrass your cold outreach.

Through a buyer’s eyes

Recurring revenue and customer concentration are not soft virtues. They’re multiple multipliers, and they’re two of the first three numbers a buyer calculates about your business.

Recurring revenue is revenue he can count on after closing. The more of it you have, the less risk he’s buying, and risk is the only thing a multiple actually measures.

Concentration is the other side of it. One customer at 40 percent of revenue doesn’t just lower your price. It changes your deal structure, usually into an earnout, because the buyer needs to see that customer stay after you leave.

Build the concentration table yourself. Every customer over 10 percent of revenue, how long they’ve been with you, whether the relationship is with you or with your company, and whether anything is in writing.

A buyer will build that table whether you hand it to him or not. Better that you see it first, two years before he does, while there’s still time to fix it.

Frequently Asked Questions

What is a client retention system?

A scheduled, automated set of touches that keeps you in front of past customers all year, owned by somebody other than you, plus a defined way of noticing when a customer goes quiet and doing something about it.

How do I calculate customer lifetime value?

Average sale, times purchases per year, times years they stay, minus what it costs to serve them over that period. Then compare it to what you spend to acquire one new customer. That ratio drives most of your marketing decisions.

How often should I contact past customers?

Monthly, on a written calendar, with the touch varying between a card, a newsletter, an educational piece and a call. Twelve rows, twelve months, and a name next to each one that isn’t yours.

Why does customer concentration lower my valuation?

Because one customer at an outsized share of revenue is a single point of failure a buyer inherits. It rarely just moves the price. It moves the structure, usually into an earnout that keeps your money at risk until that customer proves it’ll stay.

What is recurring revenue worth to a buyer?

More than the same dollar of one-time revenue, because it’s revenue he can count on without you. Recurring revenue is one of the first three numbers a buyer runs, usually before he’s read a single contract.

Is it cheaper to keep a customer than find a new one?

Substantially. You’ve already paid to attract them, already earned their trust, and already proved you can deliver. Two of the three ways to grow revenue live entirely inside your existing customer base.

How do I win back customers who drifted away?

Call them. A person, on the phone, with a real reason to call rather than a promotion. Start with five who went quiet, not five who left angry. Win-backs close at rates cold outreach never touches.

One Hour. One Price.

Sixty minutes on the phone. Bring your concentration table if you’ve built it.

I’ll tell you what a buyer would make of it, and whether your revenue looks like an asset or a relationship.

It costs $1,000.

Most business owners get one shot at their exit. One. The cheapest hour you’ll spend on it.

The material on this page is general information about how businesses are built and valued. It isn’t legal advice, and reading it doesn’t make me your lawyer. Every business is different, and the details are where the money is.