work intersect—to keep, escalate value of, and multiply customers so that your entire business grows ever more valuable and sustainable, and income uncertainty is replaced with very predictable income.
Having very predictable income should be a vital goal.
Income uncertainty plagues most business owners and often perpetuates an underlying tension and unhappiness at home with spouse and family. It’s why even quite successful business owners and sales professionals often half-joke about the people close to them still hoping they’ll “settle down and get a good job.” Income uncertainty or unpredictable revenue also injects underlying anxiety into the staff of the business, and gets in the way of their top performance. When you steady the income, you gain authority with those around you. People have confidence in you. They are more cooperative. There’s less complaining. You and they can focus on forward achievement rather than worrying. One of the best cures for income uncertainty is improvements in and systemization of customer retention and multiplication through referrals.
Very predictable income makes businesses more pleasurable to own, easier to manage, and much more valuable when the day comes for exit by sale. When properly presented to potential buyers of a company, predictable income has a higher multiple value than does unpredictable income. Recurring revenue has an even higher multiple. One of the key things an owner actually sells when he sells his company is projected future earnings at a discount. The more certain those future earnings appear to be, the less he has to discount and the more money he exits the scene with.
When you go out the back door of this book, three things should have occurred: one, you having a far richer and better understanding of the financial importance of retention and referrals; two, you having all the elements needed to assemble systems for achieving maximum retention and referrals in your particular business; three, you being highly motivated and determined to get those systems up and running. Arguably, presuming some of the first and third are already present, the second of these is most important. And the key word is systems.
I teach that all wealth is the product of systems. Henry Ford’s wealth and the Ford family dynasty wealth he set in motion is not the product of any invention of combustible engine or automobile. It is thanks to the system of the assembly line for manufacturing (vs. the traditional one-man-makes-one-product approach) and the system of franchised auto dealers (investing their money in the inventory and distribution). You can peel back the curtain of just about any successful company in any field and make similar discoveries. Our friend Michael Gerber popularized the idea of systems in business in his groundbreaking, bestselling book The E-Myth. Preceding Gerber, credit is deservedly given to Peter Drucker. But most business owners apply the direction given by such men only to management, to business operations, not to marketing or sales, and almost never to retention and referrals. If you do so, prompted by this book, you will gain significant competitive advantage, you may gain price and profit elasticity, and you can build a stronger and more valuable company!
One last point: this book contains chapters from a small, select group of Special Guests. All have their own way of maximizing customer interest, retention, and value or of multiplying customers through referrals. Each does an outstanding job at this, in very different businesses. Do NOT make the common, dumb mistake of quickly deciding their examples can’t help you because your business is different. First of all, no business is fundamentally different. All businesses have to get, make active, keep as long as possible, grow as valuable as possible, and clone or multiply customers. At least, that’s what every business should be doing. Don’t be myopic. Second, most breakthroughs in one type of business come about by borrowing ideas from other, seemingly unrelated businesses. Don’t be Amish. Be curious and imaginative.
by Shaun Buck
Are you a “pack animal”?
If you live in, follow, and hunt with the pack, you may feel safe and safer than you really are, but you will also be controlled, regulated, sometimes bullied, and often go hungry. Packs starve together. Packs sometimes are mass-hunted and killed as a group. Packs go extinct as one. If you carefully examine business history as well as contemporary business, you’ll find that nearly all the really big winners have defied and distanced themselves from their peer packs.
I was 16 years old when I got the phone call that would set my life on a trajectory I never could have imagined. It was my ex-girlfriend calling to tell me she was pregnant. For a few seconds, I was confused. Why was she calling me? That’s when she said it: “The baby is yours.”
My response was what you would expect from a 16-year-old guy. “Are you sure it’s mine?” I asked. She was sure. Suddenly, I was one of two parents to this unborn baby, and we had a number of decisions to make. As a teenage dad, I had to make a couple for myself as well: Would I stick around? Would I (or even should I) try to be a part of this baby’s life?
At 16 years old, I suddenly had to decide the kind of man I wanted to be. I had a few friends, most of them older, who also had to make the decision of what to do with an unexpected baby. Unfortunately, without exception, they all bailed on their responsibilities in one way or another. I decided to head in a different direction; I decided to be a dad. That single decision was my first real experience in breaking away from the pack and heading down my own path.
It has since been my experience that, in life, and in business as well, breaking away from the pack is most often exactly the right thing to do. So, the fact that the overwhelming majority of business owners invest comparatively little or nothing in customer retention and invest almost every dollar they can into customer acquisition speaks loudly about the right thing to do.
They Can Take Their Jobs and Shove ’Em!
At 21 years old, I made another big decision. At the time, I was working for AT&T and was making a six-figure yearly income. Not bad pay for a young guy. After reading a number of business books and taking a few business courses over the years in college, I developed an idea: A job, even a good job, was never going to give me the size and scope of opportunity that I wanted. I decided to quit my job and become an entrepreneur. My first business? A pair of hotdog stands located in front of Lowe’s Home Improvement.
My first year of income was $36,000. Not horrible for a young guy, but a far cry from the six figures I was making with AT&T. Many of my peers and family members thought I was crazy (my mom still thinks I’m crazy for not getting a safe and secure job), but sticking with the safe and secure job at AT&T was not what I wanted for my future. My pack circled me and did all it could to discourage my leaving! Although entrepreneurship is more in vogue today than it was in 2001, it is still considered risky and odd. The focus of polite society is still on jobs and careers, not taking on the outsized responsibility and risk of starting a business. While the media does make heroes out of Silicon Valley business creators, the lesson seems lost. And people starting hot dog stands are rarely glamorized. The news media coverage of the recent years’ reputed drought of proper jobs for college graduates, the debt burden with which they exit campus, the big number of them living in their parents’ basements, and the news coverage of high unemployment and stagnant wages stays stubbornly, narrowly focused on jobs—as if that was the only answer that exists. This is not so. In fact, if you learn; really, really learn “marketing” and how to apply it, your choice of opportunities in your choice of fields, professions, or industries opens up and
