• How much will they be willing to pay? Do some testing. The market will tell you if you are charging too much fairly quickly, but make sure you are not leaving money on the table by charging too little.
• Solution selling – people aren’t buying your brilliant ideas – they want solutions to their business problems. How do you communicate your value proposition to your prospects? Your marketing plan must have a laser focus on proving your value proposition to your prospect to get new business and similarly on retaining currents customers, make sure to emphasize quality service and support as well.
Customer Acquisition & Retention • You need a Business Contract - Make sure you have a reasonable contract with your customer detailing the service to be provided, timing, costs, and any promised deliverables. The time to set expectations is at the beginning of a transaction, not after you have completed the work or after something has gone wrong.
• Service level agreement – your reputation will only be as good as your ability to deliver on time and on budget. You should be willing to commit to timing and deliverables to your customer and then over-deliver.
• Excellence in customer service – the best way to get new business is from prior clients either directly or through referral or word of mouth. Giving best-in-class service to your customers is key to your continued growth. Learn from your early mistakes and adjust your offering.
KPI’s Key indicators to closely monitor the health of your company are a must. Look at software as a service benchmarks to create your own. A quick Google search will give you lots of reading material. Items to consider include customer acquisition cost, sales cycle time, customer retention, customer satisfaction, and lifetime value of a customer to name just a few. You need a measuring stick to monitor your results every single day.
Staffing Because you are selling a service, labor will be involved; And labor is one of the most difficult components of any business model to scale. In addition to finding and retaining qualified talent, costs, and training, you will need to spend a significant amount of time managing them to expected service levels.
Financial Model Considerations
Your income statement and balance sheet are the ultimate measuring sticks for how well you are doing. But in the early stages of growing your business, cash-at-hand is almost certainly your most important financial consideration. Monitoring cash flow daily is key. Following are several other key financial considerations:
Unit profit models No you can’t make it up on the volume – unless you can make a profit on each service you perform, you will be in trouble – freebies and loss leaders are not a good idea in a startup business. Consider each component of your service by determining how much time, material/supplies costs, distribution, and re-work will be involved. Then determine what gross margin you want to make and that will give you a rough approximation of how much you will need to charge for your service. If that is more than you think your customers would be willing to pay, or the value created, then start over.
Revenue projections • Market share doesn’t buy your service, customers do. Any forecast that is built upon a market share estimate is doomed. Never say: “All I need is 0.1% of the market”. Your revenue model needs to be built bottoms-up, ie what does it take to generate a lead, forecast what percentage will convert to customers, and when multiplied by pricing, you get your revenue. We will discuss this in more detail in our next article.
• Pricing model considerations – freemium, multiple categories, (silver, gold, platinum)? Chances are that all of your customers won’t fit into a single pricing model. Be prepared to offer a range of service offerings at different price points.
Operating Expenses/overhead • Customer acquisition costs can vary significantly. If you have repeat business from a customer, ie serving a realtor, then your marketing costs may be relatively low. However, if your business is project to project, then you will need to have an ongoing lead generation and marketing effort. You should make an estimate of the ‘lifetime value of a customer’ at the very beginning of your marketing development plans. This potentially will be one of your largest expenses unless you rely strictly on word-of-mouth referrals. We will discuss this in more detail in our next article in this series.