I have worked with many SME’s over the years and perhaps one of the most common traits I have seen is a business which has/is growing rapidly in terms of sales but lagging in operations, affecting the delivery of its products or services. Often, as business owners, we concentrate on the all important growth in revenue but don’t always put enough energy in to bolstering the back-end of the business which is responsible for delivering on the promises our sales people have made to our customers.

Rapidly increasing sales through acquiring new customers, developing new products or services or entering new markets can have a significant effect on the operational side of our business. For example, if we’re a manufacturer and our sales team has recently acquired a number of new customers, unless we have made plans to be able to cope with the additional workload, it’s possible that we will run into problems such as late deliveries, poor quality or increasing injuries to our staff. We have to think about things such as capacity (people and equipment), inventory holding and distribution and many others in order to ensure that we deliver on our promises made to our existing and new customers.

Then, there’s the potential financial impact. Many businesses have committed suicide through growth. Rapid expansion can have major effects on working capital (inventory, work in process, debtors and creditors), spare capacity, overtime, reject rates etc. Many of these areas attract additional and unplanned cost to the business. Sometimes, we even get drawn into accessing that “never used” overdraft.

Often, we acquire new customers with the same number of sales staff which can stretch them in terms of their ability to tend to all their customers. This can lead to decreasing customer service or even lost business when existing customers take their business elsewhere. Perhaps there’s a point where increased productivity from a sales rep or BDM actually becomes unproductive.

So, what do we do about this? How do we plan for growth and make it sustainable? If we have already grown our revenues, are we delivering on our promises? What measures should we use to track our performance? What are the areas that we should focus on? How long should the preparation phase take?

All these questions should be answered. You should have a plan to make your growth sustainable. You should be properly prepared before you acquire the additional work. Each week, we’ll answer your questions and help you to grow your business revenue and deliver quality products & services, on time and with the expected level of customer service. If you have a particular area that you would like discussed, comment on this blog and we’ll address your question(s).

Referral Marketing – Does it work?

I have been doing some research on referral marketing for a client. Their business is a B2C (business to consumer) organisation that has over 600 customers on their database. They service over 50 of those customers on a monthly basis. Where does most of their business come from? The Yellow Pages Directory of course. But, the next best source of business comes from referrals by existing or past customers. So, we decided to look in to a system that would drive new business from the existing database. The answer in this case, is a referral system. Now, keep in mind that in order to gain maximum benefit from a referral system, you have to achieve very high levels of customer satisfaction. No customer is going to refer your business to someone else if they are dissatisfied, quite the opposite in fact. We did a customer satisfaction survey first and established that this business had a fantastic level of customer satisfaction.  Luke Matthews – Sustainable Operations Management. http://www.somconsulting.com.au

The referral system is basically a regular contact with your existing and past customers, ensuring your company stays at the fore-front of their mind. This regular communication comes in various formats but could be as simple as a postcard with your brand on it. The thing that will make this work is the customer who refers the business to a friend or colleague puts their details on the back of the card and passes it on. The person who receives the referral provides that card to you and you send some sort of reward or gift to the referer.

To make this work, a reward for referring is vital. People may not go to the effort of filling in the card and passing it on if there’s no incentive to do so. People love free things and often go to lengths to get them. And, at the end of the day, how much does it normally cost you to acquire a new customer? Hundreds or thousands of dollars? So a $20 voucher is a much more cost-effective method isn’t it? Of course it depends on what your average sale value is too.

In an environment where a substantial amount of business is conducted on a referral basis, this seems to be a winner. So, my conclusion is that referral marketing is a viable method of acquiring new business. And, there are automated systems out there that make it easy to do.