THE 1 Thing You Need 2 Measure 4 High Small Business Growth & Profits

INTRODUCTION:

I'm a great believer in the saying that "Success Leaves Clues". An excellent example of a predictor of growth is an article I read in Harvard Business Review about Enterprise Rent-A-Car in the US who decided that they would change the way they did customer surveys.

By deciding to concentrate on a couple of key areas of their customer responses, they found they were much more able to measure the predicted company growth.

As small business accountants and business valuers, we recommend that all our clients in business should regularly survey their clients. Many of us want to hear positive feedback which is nice but it's also critical that we take notice of any negative feedback and act where appropriate to fix the customer's experience.

So exactly what did they do and what lessons can be learnt?

Figure 1: Would your customers recommend your business to someone else?

1. Keep Questions Simple

Enterprise decided to stop asking endless questions in their surveys and just ask two simple questions. These were:

• Was the customer happy with the quality of the service or the product; and
• Would they be likely to refer the company to others.

Not only was the response to the survey much better because it was more simple for the customers to fill in but it was also much easier to collate and measure so that results weren't all over the shop. This made it easier to get focus.

2. Measure Whether Customers would refer

This was the critical measurement out of the two. Quality is also obviously important and a consistent negative response would require further action but if somebody is happy to refer, chances are they are happy with everything else.

Keeping clients happy is not only a way to sustain growth but also get new clients through word of mouth.

All small business accountants Sydney and Dubbo should practice this and see how their business is performing. After all we are advising what clients should be doing to grow their business.

Figure 2: Getting consistent referrers will create one big happy family!

3. Keep Track of Those that Were Extremely Happy

While this was the response the company concentrated on, they went one step further. They decided it would measure only those that were extremely happy. This was an unusual strategy by the company as you would think that ignoring everyone else and getting an average would be a better than just concentrating on those that were very happy to refer.

However, the company found that by having a target of getting a high percentage of extremely satisfied customers, their growth and more importantly profitability was much more easy to predict than when averages of many responses were monitored.

Figure 3: Happy customers keep coming back and with their friends! Photo courtesy Lara Scolari Gallery Balmain

4. Understand and Measure Net Promoter Score

Whilst Enterprise had great success measuring only those that gave an 8 out of 10 or higher when indicating whether the customer was likely to refer, research does show that where your monthly net promoter score is low or in negative territory then unless you fix the problem your growth and profits will be on the way out giving you a much less attractive small business valuation.

Your net promoter score is where you have customers more likely to refer than those that won't. The difference between those is the net. Naturally the higher the better.

Enterprise also found that where they linked employee rewards to high levels of customers that were extremely happy as opposed to those who were indifferent, the overall culture of the company improved as the employees who were dealing with the customers were more focussed of ensuring they got a 'great experience'.

CONCLUSION:

Customer surveys are important but only if you measure them and take action when they are giving you business intelligence. Sometimes it's better to keep it very simple and measure one or two things.

What is your company's net promoter score? If you don't measure it each month or you are not sure, it's time to revisit your customer surveys.

Your business growth and profits could depend on it!