As our business grows, the time dedicated to acquiring new clients vs. meeting the needs of current clients fades. Search the web for “client acquisition”, and you’ll quickly find an overabundance of resources to help acquire and retain clients. What’s missing for small business owners is guidance on how to allocate the precious little time we have to acquire clients vs. retain clients, especially without a dedicated marketing team. Although balance between keeping current clients and finding new clients is unique to each business, we raise the question—are you spending enough time acquiring new clients?
During stage one of business growth and development, Core Business Development, growing your client base is the primary focus. To move successfully from one stage to another, obtaining new clients remains the primary objective for a service business until revenue of $500,000 is achieved. For manufacturing, the revenue is $1.5M. The challenge for small business owners is balancing the time between meeting the needs of current clients and spending time acquiring new clients.
When first launched, every entrepreneur invests the lion’s share of their time into acquiring clients. Over time, one’s focus quickly turns to delivering on the promises made to clients. With a growing client base, little time or thought is given to continuing client acquisition strategies.
The book, Marketing Metrics, tell us that the probability of selling to an existing customer is 60–70%. The probability of selling to a new prospect is 5–20%. Despite the numbers, and given our real-life client experience, we conclude that new client acquisition needs to remain a priority for small businesses—or at a minimum—time needs to be intentionally carved out to develop new leads for our business.
Once Upon A Time…
It was an exciting time for ABC Whatnots and DEF Whacha-ma-call-its! (The business names were changed to preserve confidentiality.) Both entities were growing quickly. The cause of their rapid ascent? One major account was contributing over 50% of their revenue. Unfortunately, ABC Whatnots and DEF Whacha-ma-call-its had placed the majority of their “eggs in one basket”.
Knowing the value of these key clients, ABC Whatnots and DEF Whacha-ma-call-its worked extremely hard delivering on their promise. So hard, in fact, that much of their time was spent servicing the Goliath client, with little time dedicated to new client growth.
Despite their grand efforts, and through no fault of their own, each suffered a similar—and significant—blow.
ABC Whatnots major client experienced money problems. This delayed payments that stressed the finances of ABC Whatnots. Thank goodness for the financial reserve that allowed ABC Whatnots to stay afloat while they rebuilt their new client acquisition momentum.
DEF Whacha-ma-call-its lost their major account. Their client decided to take the service, once provided by DEF Whacha-ma-call-its, in house. The result? With the loss of a major account, the business teeters on the precipice of closure.
The Customer Life Cycle
According to Customer Service Lifecycle, LLC, there are four phases of a customer life cycle—acquisition, service, growth, and retention.
In a nutshell, activities related to acquisition include tactics such as blogging, networking, social media marketing, email marketing—whatever you use to build awareness and create trust.
The service phase simply means providing the service for which the client engaged you.
Growth includes identifying opportunities during which you can provide additional services or products beyond the initial engagement to your clients.
Finally, retention is the effort exerted in providing excellent customer service and quality delivery of services that cause the client to want to continue to do business with you.
Time Well Spent is Time Well Invested
Consider this: Based on the four phases of a customer life cycle, how much of your effort, including time and money, do you currently allocate to each phase?
Go ahead. Take a guess. We’ll wait for you.
Is enough time apportioned to each phase to give your business the stability it needs to sustain growth over the long-term? Or, are you time/resource heavy in one area or another?
Considering your growth goals, how much time and money needs to be allocated to each stage? We’d love to hear about your experience with the client acquisition-retention balance.
Although Bain & Company reports that it costs 6–7 times more to acquire a new customer than retain an existing client, customer acquisition is essential to the success of any business.
We would love to hear your thoughts. How much time you currently spend in each phase? Do you plan to make any adjustments to better grow your business?