This series of 5 articles is designed to help you reflect and focus on what's most important to you in 2020.
Previous articles:
2020 Focus area 1)
Know what you want, and have a robust plan to get it
2020 Focus area 2)
Getting new, quality clients, with less stress
Onto today's article.
So there are just three ways to grow your business:
- Get more new clients
- Get those clients to buy from you more often
- Get those clients to spend more every time they buy
Most people focus only on number 1. Yet the most robust quick growth in a flat business (and greatest jump in net profits) typically comes from focusing on 2 and 3 together.
I call this “money on the table”. There’s always extra stuff your clients will buy from you, if only they knew about it.
A Key Performance Indicator (KPI) to track is the ALV – Average Lifetime Value – of a client to your business.
Your goal is to be constantly pushing this figure up. By increasing the time they stay with your business. And finding more things for them to buy.
The secret is to appeal to the heart. Not the brain
The brain is waaaaaaaay too hard to influence. And it only makes buying decisions based on what it needs.
Needs are low value. Functional. The brain is a Vulcan (like Mr Spock off Star Trek). It’s making boring, dull, practical, logical emotion-free decisions.
We don’t want to talk to the brain. We want to talk to the heart.
The heart makes buying decisions based on what it wants.
Wonderfully emotional and exciting decisions. That make people feel good.
Did you think it’s the brain that picks a £40,000 car? Nope. The brain needs a £5,000 Ford Focus. The heart wants a £40,000 BMW.
No matter what kind of managed services you sell or how you sell them, the secret is to talk to your clients’ hearts.
And when you fully understand that, you realise that there’s no hard selling required
The number one factor that stops MSP owners from trying to sell more to existing clients is fear.
Fear that the client will feel they have been pressured into buying stuff. And as a consequence, they will stop buying the core service (switch to another MSP).
This simply will not happen. Because you’re selling what they want, and not what they need.
The brain doesn’t like spending money. It prefers to hoard it. So it sees each need as a distress purchase.
Yet the heart loves spending money. It sees wants as a “treat”. And it likes treating itself all day, every day.
Ever wondered why people spend £5 on a coffee and a cake at Starbucks? When they could take a flask of coffee and a cupcake from home for 20p?
Starbucks would not exist if our brains were in charge of spending decisions.
You need to put more stuff in front of your clients that they might want. Don’t decide for them whether they actually want it or not. Let them decide.
But do teach them about it. Make them salivate. Remind them of the trust bond you already have. Perhaps offer a deal to reward fast action. But remove any pressure to buy.
And then SW3…
- Some Will buy
- Some Won’t
- So What? Next!
You know what’s really weird… those who choose to buy will be HAPPIER with your business. Because they have made the choice to buy more. The heart loves spending, remember.
This may be the complete opposite to the way your staff think. And this might explain why some of them believe their job is to be a Revenue Prevention Officer, encouraging clients NOT to buy more!
Get this right. And the rewards are greater than you think
Getting new clients is bloody expensive. It certainly costs you a lot more in time, cash and opportunity cost, than you realise.
Selling more to existing clients is so much more profitable. The cost of sale is dramatically lower. The onboarding cost vanishes. Because you are leveraging existing relationships.
And you don’t need to sell a great deal more to have a massive impact on the business’s net profitability. And your personal income.
The final part of this is turning a high proportion of your revenue into Monthly Recurring Revenue (MRR)
Not all revenue is equal. Money that turns up every month without needing fresh sales is worth considerably more than money generated through new sales.
MRR is typically more profitable long-term. And it develops better clients, who are happier and spend more.
So here’s a question to think about later today – what level of your turnover is MRR? And what's stopping you increasing it this week?
I work with MSPs where the MRR is 80% and higher. Those are fun businesses to work with. Because the owners are considerably more relaxed and can make better long-term decisions.
Typically they only take on projects in order to generate more MRR. It's nice to get a cash boost for installing a server. But it also stretches the business. So you only do it where it's absolutely necessary, or sets up the conditions to sell your client a new MRR.
This is a new way of thinking; a way of life for the business. And it creates a more profitable business that you will love for longer. That's great for you, your staff and your clients. Win win win.
