Near-Term Results: The Pathway To Retention with Frank J. Mummolo, Ph.D., P.E.
I began in this business in 1999.
Prior to that, I had a pretty successful career as a CEO in the corporate world and, when I tired of that, decided to buy my own company, which I did in 1995: a $20M manufacturing company that was losing $2.5M per year.
I took it to profitability in 90 days.
Shifting trade regulations in early 1998 laid out the tea leaves for me to read and I sold it later that year and decided to take the lessons I had learned in 20+ years of senior business management and set out into the business consulting world.
My very first client (I swear I’m not making this up) was the guy who invented the Stress Ball. Seriously. The man was a marketing genius and ran a promotional products company in the Northeast with annual revenues of $4.5M. Three years after introducing this blockbuster product, his revenues soared to $50M. And it almost destroyed his company.
At this point, I was connected to him through a mutual acquaintance who alerted me to his concerns about the chaos in his manufacturing operations. My due diligence on the problem quickly convinced me that the root cause of the problem WASN’T in manufacturing. It was the “front end (order entry, etc.)” of the business.
I told him he needed to fix THAT before we could address the factory and offered to prove it to him in 60 days, which I did. The result was an 18-month engagement that made him several million dollars in profit. I did pretty well also ($540K).
Recently, I signed a client with $6.5M in annual revenue with a cash flow problem.
“How the heck does THAT happen?” you might ask. Well, it does if your gross margin is only about HALF what it should be.
In their business, it was only 26%. It should have been 40%. Fourteen points of margin improvement on a $6.5M business drops $910,000 to the bottom line. “Would you like me to help you do that?’ I asked. Boom. $30K client. Guess what happened in the next 60 days?
My point in recounting these two brief episodes isn’t to brag. It’s to illustrate a point that’s central to my own personal business advisory strategy: I prefer client RETENTION to client ATTRACTION. Again, that’s just me.
Client ATTRACTION can be difficult. Client RETENTION can be easy, IF… and ONLY IF… you can demonstrate near-term results and, especially near-term results on the bottom line. Improve cash flow, find your fee in 30-60 days and clients will hang around for a LONG time.
My average client stays with me 3+ years and NONE of them sign a contract. We’re strictly month-to-month. I even tell them that if I fail to earn them back my fee in increased PROFITS within 30 days, I’ll refund their money in full… and I offer to put that in writing. Guess how many clients have ever called me out on that one?
One of the keys to getting near-term results is to have a variety of resources at your disposal and to clinically assess the root cause of the problem at hand. Not every struggling business will see a near-term benefit from a lead generation strategy. Or a # of transactions increase.
I’ve found over the years that if you only have one solution to a problem, you don’t really understand the problem.
And if your customer is struggling with cash flow issues, he/she isn’t going to hear anything you’re telling them about marketing strategy or anything else until you resolve it.
When it comes time to write that second or third check to you, they’re going to be doing a mental ROI calculation and wonder just exactly how much value you’re bringing to the table.
For me, a great jump-off point is usually a review of the prospect’s financial statements. That’s not only a great way to show them the potential in their business but a path to getting significant, near-term results.
One last recent example
Three weeks ago I signed a remodeling contractor who has annual revenue of $750K and only pays himself about $40K per year, with no additional cash left in the business (i.e., Owner’s Equity). He’s barely paying his bills and building zero value in the enterprise.
Upon a quick review of his financial statements, I quickly saw the problem was his Gross Profit and then traced that to improper pricing procedures (common in this sector).
Within two weeks, I taught him the correct way to set pricing and convinced him to quote just ONE job using my method. Result: a kitchen remodel with a direct cost of $12,500 which he was going to price at $17,000 ( a 26.5% profit margin) was proposed at $21,500 ( a 42% profit margin), putting an additional $4,500 in his pocket (and, yes, he got the job).
That’s the first thing we’ve done together and I charge him only $2,000 per month. Think he’s going away anytime soon?
So think broadly about your business coaching toolbox. Marketing programs are great for attraction. Operations and business finance programs are a great supplement for retention. I’m the world’s laziest coach.
The more retention I have, the less attraction I need.
About Frank Mummolo
Frank Mummolo is a professional CEO, noted author, speaker, professional business advisor and creator of the 6 Cylinder Success® which helps business owners rapidly improve profitability and increase the cash flow in their enterprise. Visit his website at 6cylinderbusinessacademy.com
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