3 essentials to grow a company

Looking back on my time running my own company there are three things that I did consistently. I didn’t realise the importance. I just did it. As Entrepreneur in Residence at Bristol University, I saw the same three things in companies that were successful.

So what is the magic?

Customers, More Customers and Profit. To explain:

  1. Customers. There are two approaches to customer. Make a “one-off” sale or make a number of sales over a long period of time. I advocate the second approach since it maintains a long term income stream. We sold our customers a Messaging Server and then annually a support contract or upgrade to the latest version of software. The target was to retain as many customers as possible.
  2. More Customers. We kept the pipeline of new customers filled to ensure that the increase is greater than those leaving. For example, new customers purchased our Messaging Server due to reviews in magazines, customer referrals, etc. and some we lost because their companies went under, were bought, etc.
  3. Profit. Every sale must makes a profit to keep the company going. Making a profit means knowing the cost of supply of the product or service. For example, we sold Support contracts that would pay for approximately an hour of engineer’s time. On average each support contact would cost us 2.8 hours to resolve. On the face of it we made a loss (and the customer got excellent value for money). But we knew that only 1 in 8 contracts would result in a support incident. (If only we knew which one of eight not to sell!)

Once your company is generating profit then you have dramatically increased your freedom to operate. You can elect to take the profit as dividends; bonuses; more staff; continue innovation in product and/or process; new products; invest in new, external opportunities; etc. The choice is yours.

This Post Has 2 Comments

  1. Stating the obvious from time to time doesn’t hurt! A very useful reminder 🙂

    I urge caution with (2) though. Not convinced that “ensur[ing] that the increase is greater than those leaving” should be the only goal. The QUALITY of customer is important too. I’d be delighted with a drop in customer numbers if I’d lost my three least profitable, most irritating customers and had gained one fabulous one.

    1. Hi James,
      Yet again, you make an excellent point and I completely agree. Some companies have a strategy of losing the bottom 20% of clients each year to ensure that they are always working effectively with and spending time on their best customers.
      Brian

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