When it comes to making any big changes in a business, there are certain areas that should be dialed in first. Let’s cover six ideas this author thinks are high leverage starting points. If not being properly utilized already, these are big areas for improvement for any business. Before embarking on other projects, it’s important these focal areas are dialed in.
- The customer service (CS) department needs to be well trained, highly responsive, and have the authority to make rapid decisions on behalf of the customer. As a consumer, there is nothing worse than getting no response, a snarky response, or leaving a CS interaction feeling like a company does not value their customers. As Tim Ferriss wrote in The 4-hour Work Week, giving your team the ability to make decisions up to a certain dollar amount frees up work at the top of the food chain. E.g. If a customer has an issue regarding a $30 purchase, let your CS team make the decision to refund the customer without having to get approval from anyone up the chain of command. Moving faster here makes for more satisfied customers.
In the home services space, showing up on time and offering friendly customer service is often enough to separate one business from local competition. Namely, painting, plumbing, electrical and HVAC companies are notorious for bad customer service. Offering a better alternative in this department can set a business miles apart by driving growth through referrals from happy clients.
- Sales teams need to send follow up messages. Especially with inbound inquiries. Don’t be spammy (CAN-SPAM laws regulate what is and is not appropriate for email), but letting deals die in the inbox because of a failure to send a follow up is a poor excuse for bad sales. Make it a point to send at least two follow ups when potential customers reach out. Be respectful, share as much information as possible, and focus on adding value.
- Respect among employees should be dialed in before any large projects are undertaken. Harassment is unacceptable in all scenarios. No one should be afraid of their coworkers. Complaints about employees need to be taken seriously and dealt with seriously. There should be no tolerance for employees who make others uncomfortable, spread malicious rumors, cause drama, or are, god forbid, violent. Act swiftly to remove bad actors.
Along these lines, hire a diverse workforce by advertising your open roles in diverse places. One way to create an environment that is open and accepting of diverse hires is by hiring a diverse workforce as early as possible. It’s a bit of a catch-22, but for the long term stability of a company, diversity is good. If a business gets to 20 employees and has no diversity, there is a problem. Hiring a (good) “community manager” or “head of people” role is another possible step to creating a work environment that is warm and welcoming. Removing bias from an interviewing & hiring process is also necessary.
- Use social media to your advantage. Connect with customers and potential customers on the platform that makes the most sense for your domain. Food, art, travel, cars, and other products that have a big visual component should focus on Instagram. Knowledge products do well on Twitter, Reddit and even LinkedIn. Your domain, your call, but in this day and age, companies are routinely discovered on social media. Don’t get left out. Keep a pulse on your Google business page, yelp page, tripadvisor page, etc., and be ready to interact with customers.
A simple tactic for building a social media following is to follow popular accounts that operate in your domain, turn on notifications for their posts, and comment as quickly as possible. By being a top comment that adds additional value, people will more likely discover and click on your account.
- Scrutinize business finances with respect to growth rate. If ACME Corp. is spending significant money on advertising but bringing in very few new customers, they’re likely targeting the wrong audience, using poor copy, or failing to show the value ACME adds. Specifically, the customer acquisition cost (CAC) should be lower than the expected lifetime value (LTV) of the customer. As an example, if it costs $500 to obtain a customer (via advertising costs) who will contribute $100 of revenue, that particular business model will not be sustainable. If it costs $500 to obtain a customer who will contribute $5,000, the business will be in a much better position, assuming there is a handle on other costs. This is a simplified version of CAC, but the point is, if a business is spending a lot of money to grow but not growing, something is wrong.
Additionally, understanding what areas of a business cost the most and contribute the least will provide a North Star regarding where to focus efforts. If, for example, ACME has a high error rate building cabinets, which in turn creates a lot of re-work, that particular operation needs to be focused on. If a restaurant is routinely having to fix undercooked or overcooked meals, for example, finding out why and fixing the root cause of the issue will be a big factor in reducing costs (both labor and raw material).
6. The last high leverage piece I want to address is product- market fit. The term, popularized by investor and businessman Sean Ellis, is a reference to how well your product or service meets the needs of your market. Google was not the first search engine, but they built a product that served people better than Ask Jeeves. The most popular metric is known as the 40% rule. If 40% of the people your business serves would be “very disappointed” if your company went away, there is most likely product-market fit. As a general heuristic, if a business does not have a product-market fit, they won’t last long. Prior to diving into any big improvement projects, there should be evidence that there is a long term need for the product or service.