The 4 Ways to Grow Your Business

Step 2 - Increase the Number of Times Customers Come Back

Acquiring new customers is known as 'front end' marketing. Customer retention, or getting your current customers to come back to you, is known as 'back end' marketing. Increasing the number of times your customers buy from you is vital to the long-term health and profitability of your business.

Think about this: It can cost up to 6 times more to win a new customer than it does to have an existing customer purchase again. Why? Because you invested time and money to acquire that customer for the first sale, but every additional sale after that doesn't involve any cost. So for every sale you make to a previous customer, you actually keep more as profit.

Increase Customer Return Rate - Classify Them

One of the first ways to ensure that the right customers keep coming back is to classify your customer base into tiers: A, B, C and D customers. A customers would be your best and most desired, the ones you WANT to work with because they are loyal, dependable, or just plain nice. B's have the potential to become A's with a little work. C's are not ideal, and D customers are ones you'd just rather not deal with again.

This classification process means that your ongoing communication and marketing approach will be more appropriate for each group. For example, your A customers are the ones you most want to keep working with, so you might invite just them to join a preferred customer club, or A's and B's would get special mailings and offers, etc. You could even go so far as to ask your D customers to go elsewhere, freeing up more time and energy for your preferred customers.

Increase Customer Return Rate - Ask Them To!

Could it be that simple? Most businesses fail to recognize the profit potential in inviting past customers back. It really is as easy as that - assuming they were happy with you the first time. Once a customer is delighted with a product or service, they want to continue the relationship. Making them feel important and valued gives them the incentive to do that.

Remember that 68% of customers who leave you for your competitor do so because of the perceived indifference. In other words, they didn't feel that you valued them or were concerned whether they bought from you or not. Not following up to say thank you and please come back, not making them special offers or sending them special mailings, not asking for input, can be perceived as indifference to them as individuals and as customers.

Increase Customer Return Rate - Provide Awesome Service

Another great way to keep customers coming back to you more often is to offer service that goes above and beyond the norm.

Creating a team commitment to service can impress your customer enough to keep them returning and referring others. The commitment could make certain promises of performance standards, and could explain your business ethics and mission. These can make great UCDs as well.

Awesome service, like good telephone technique and selling technique, can actually be systemized so all the team knows what they are expected to do for a customer and just how far their authority extends in bending the rules. You can't stop at saying you want your customers to be given awesome service - you need to train the team so they can deliver it consistently and effectively.

Increase Customer Return Rate - Nurture Them

It's important to nurture your relationships with your customer in the same way you would any other important relationship. Nurturing is the most cost effective way to make customers feel valued and motivated to keep purchasing from you. The more you stay in touch with them, the more likely they are to remember you.

Here are some ideas on how to nurture existing customers:

• Send regular maiings to build on the relationship such as newsletters, offers, calendars, service reminders, thank you notes, special articles of interest, holiday cards, and so on
• Establish a loyalty program that rewards frequent purchasers
• Make follow-up phone calls to make sure they are 100% delighted with the product or service they received

So set up a system for ensuring that the relationship with your customers stays alive and encourages them to repeat purchase.

Increase Customer Return Rate - Use Customer Comment

Asking for feedback lets customers know that you are truly interested in them and their opinion - something other businesses just may not bother with. And the feedback you get can be extremely valuable for your strategic planning.

One way to do it is with follow-up calls just to make sure they are happy with their purchase or to get in with some damage control if they are not.

Another way is to use a satisfaction survey, although it's sometimes difficult to get them returned, particularly if the customer is happy! You can also ask customers who submit positive comments to be a reference or provide a testimonial for you.

And customer advisory boards can be very useful too. You invite a group of frequent customers to come together and discuss a particular aspect of the service they received, what they valued, what could be improved, and so on.

When you do make the effort to gather feedback, and the customer has made the effort to give it to you, don't waste it. Use the information to continually improve the way you do business, and let customers know that their suggestions are being used.

Sales Tax Items and Sales Tax Codes in QuickBooks

Are you puzzled about how Sales Tax and Sales Tax Codes work in QuickBooks? Once you understand the basic setup it is pretty straight forward. We're going to take a look at the proper setup of sales tax items and sales tax codes.

Although very small businesses may be exempt from charging GST or HST the Canada Revenue Agency requires that all corporations and businesses register and collect GST or HST. These businesses remit the sales tax on a monthly, quarterly, semi-annual, or annual basis. The amount of GST or HST spent on purchases is deducted from the taxes charged to customers.

In broad terms collecting sales taxes in QuickBooks means creating Sales Tax Vendor, Sales Tax Items, Sales Tax Group, and a Sales Tax Code.

Sales Tax Vendor

Properly setting up a tax code in QuickBooks all begins with establishing a tax vendor. On the vendor information tab there is a box marked "Vendor is a Sales Tax Agency". When you tick this box a new tab is added for Tax Agency information. You will need to identify what type of sales tax (i.e. GST, QST, or other provincial tax). You will also identify the reporting frequency and the account to track taxes charged on purchases and sales (only one account is required for both the taxes charged and the taxes spent).

Sales Tax Item

The next step is to create a Sales Tax Item in the Item List. You will need a separate Sales Tax Item for sales taxes charged to customers and another Sales Tax Item for purchases. When setting up the items you will identify the percentage rate of tax to be charged, the Vendor Tax Agency, and the reporting line on the tax remittance form. A Sales Tax Group is needed if you have separate sales tax items to be included in one Tax Code. For example, where there is a Provincial tax and GST you will need a Sales Tax Item for each plus a Sales Tax Group to join them together.

Tax Code

Once all the above steps are completed then you can create a Sales Tax Code. These codes are used when creating customer invoices, entering vendor bills, or creating cheques. These can be set up from the Sales Tax Code List.  Is is best to use a simply code to identify the tax rates. For example, use H13 for HST at 13% or H15 for HST at 15%.

These guidelines presume that you have no Sales Tax Items or Sales Tax Codes set up yet in QuickBooks. Nevertheless, many of you reading through this already do. If this is the case, just go to your lists and see if your Sales Tax Items and Sales Tax Codes are set up correctly. If you need any assistance give Galloway Consulting Group a call at (416) 803-5638 to arrange a consultation.

What is the Difference Between a Bookeeper and an Accountant?

Bookkeeping is a task oriented function that routinely and systematically records the organisation’s day-to-day financial transactions. Accounting is more results oriented than bookkeeping in that it is involved more with the interpretation and use of accounting information than with its actual preparation.

Definition of Accounting

• an informational process that identifies, classifies and summarizes the financial events that take place within an organisation
• a reporting system that communicates relevant financial information to interested persons, which allows them to assess performance, make decisions and/or control the economic resources in the organisation

Now, as a rule, bookkeepers only do the first element while accountants, who could do both, generally do the second. This is because accountants are uniquely specialised professionals whose time would be poorly invested in tasks that a computer + accounting software + a competent bookkeeping person could easily perform.

Bookeepers

Bookkeeping is generally the tedious, clerical and exacting role in the accounting system. These days bookkeepers use computer and accounting software like QuickBooks to do much of this work. Bookkeeping is a task oriented function that routinely and systematically records the organisation’s day-to-day financial transactions.  The bookkeeper function is performed primarily by skilled clerical personnel who may or may not have had any formal accounting training. They will however, have a basic knowledge of the 'double entry system' which ensures that financial transactions are recorded correctly. 

Bookkeepers are required to classify transactions into the correct ledger accounts as previously determined by the accountant and business owner. A final check in the bookkeeping process is called a 'trial balance'. This summary makes sure that the financial transactions have been correctly recorded. At this point the bookkeeper usually hands the system over to the accountant who performs the second element of the accounting function - the analysis and reporting.

Accountants

Accountants deal with the big picture. They set up the overall structure and design for both the financial information capture and the appropriate financial reporting functions. Accounting is more results oriented than bookkeeping in that it is involved more with the interpretation and use of accounting information than with its actual preparation.

Accountants are responsible for reporting to governments and statutory requirements. These reports include the preparation of the Statement of Financial Performance and the Statement of Financial Position. They also work to prepare reports and give advice that assists business managers in the development of their enterprises. Advice ranges from evaluating the efficiency of the business operations, resolving complex financial reporting issues, cash flow and profit forecasting, auditing to check the accuracy of the information, tax planning and lawful tax minimisation and redesigning the business accounting systems to ensure maximum efficiency. Generally accountants need to be highly qualified with a university degree plus membership of a peak accounting body that is maintained by the accountant's continuous professional development.

Keep Your Accounting Records

Client often ask us which accounting documents they should keep. The general rule is that Canadians who file their income tax and benefit returns electronically, or who do not file information slips and receipts with their paper-filed returns, should keep their tax records on hand in case they are contacted by the Canada Revenue Agency (CRA) for 7 years.

After returns are filed, the CRA verifies the income reported, as well as the credits and deductions claimed. Reviewing filed returns is essential to protecting the integrity of Canada's self-assessment tax system and to ensuring that Canadians pay their taxes. For the 2008 tax year, about 2.4 million individual returns were reviewed.

Some of the first reviews of deductions and credits are done when the returns are filed, and before taxpayers receive their notices of assessment. However, most reviews take place later in the year, as the CRA works to verify the information on an individual's return and compares it with the information provided by other parties, such as employers, spouses, or common-law partners.

During this review process, the CRA may contact taxpayers to ask for more information on income sources or dependants. We may also request copies of receipts or information slips to support claims related to: 

• medical expenses;
• charitable donations;
• child care expenses;
• spousal or child support payments;
• moving expenses;
• the home renovation tax credit; or
• registered retirement savings plan contributions

In addition, the CRA may ask you to support your claim by providing proof of payment in the form of cancelled cheques, bank statements, or other documentation.

Keeping your records on hand makes it easier to respond to these requests. It will also help you explain your tax and benefit situation to the CRA if you do not agree with your assessment or reassessment.

Receiving a request for receipts or documentation does not mean you are being audited by the CRA. When an individual is selected for an audit, the CRA tells them that their tax and benefit situation is being reviewed and calls to arrange a meeting to begin the audit.

The 4 Ways to Grow Your Business

As the deadline for launching our new blog looms, I had been giving some thought as to what to discuss. When, I remembered a conversation with a client last week about the state of his affairs. It suddenly dawned on me that the perfect topic was about business growth. As entrepreneurs, we are all concerned with creating and growing a business that will someday have a value to be sold.

It may sound a little simplistic, but there are really only 4 fundamental ways to successfully grow your business - in other words make it more valuable:

1. Increase the number of customers of the type you want to have

2. Increase the number of times customers come back

3. Increase the average value of each sale

4. Increase the effectiveness of each process in the business

This topic looks at some of the key strategies within each of these 4 ways that you can use to make your business more valuable. It also looks at how they should be used synergistically in order to capture the greatest value and not miss out on opportunities to grow the business. Any other strategy that doesn't appear to sit in one of these four ways, for example cutting costs, may help you temporarily, but it won't grow your business. Cutting costs won't make your business more valuable unless you turn around and re-invest the money you save in one of the four ways.

Step 1: Increase the Number of Customers You Want

Today I'm going to go through the first way to improve business value. I will cover a fair bit of ground so be warned that I won't be going into too much detail on specific techniques that you can customize, however in the future I will have related blog entries that will break this subject down further.

Winning new customers, or customer acquisition, is where most business owners focus first, so it's fitting that we begin here. Customer acquisition is known as the 'front end' of marketing - it's about achieving that initial first-time contact with a potential customer. While there are hundreds of ways to win new customers, we'll be looking at the 5 major strategies for this:

• Developing unique core differentiators for your products and services
• Tapping the power of the phone
• Implementing a sales system
• Using Market Research
• Developing a promotions plan

Develop Your Unique Core Differentiators

A Unique Core Differentiator is the reason why customers buy from YOU - something you have that is of real value to them and decides their buying decision in your favor. You may in fact have several UCDs - different ones targeted towards different segments of your customer base.

Good UCDs can come out of simply reviewing the way you do business and deciding to emphasize some aspect of what you already do or of thinking up a different way of doing it. For instance, if you ran an automobile parts business you could offer as UCDs:

• Free same day delivery of parts ordered from repair shops within your area - only you service customers who need fast delivery
• Keep a range of parts for classic cars - only you meet the needs of car enthusiasts in the area
• Offer a top discount to trade customers who spend over a certain sum each month - only you offer this good deal to cost conscious customers

Any one, or maybe all, of these could be effective because each is based on a consideration of what is important to at least one segment of customers, or a particular customer need.

Think about how you'd finish this sentence - 'People buy from me because I'm the only business that...' If you can put in something there that only you are doing, then that's a UCD. If you can't, then its time to start thinking about creating some UCDs for your business.

Tap the Power of the Phone

Many marketing people consider the phone to be one of the most under utilized resources in business today. Too many business owners spend time and money looking for new ways to promote themselves when they could improve sales simply by improving their phone technique. An effective phone technique is really important in keeping prospects interested - there's no percentage in spending money on generating leads only to turn them off the first time they call because of the manner in which you talk on the phone; or by handling the call carelessly and leaving people hanging for long waits; or setting up one of those telephone tag situations. We all know how frustrating those things are.

Among the things your team can learn in customer service skills training there may be none so important as phone skills training. Whether it's doing sales calls, handling information inquiries, or fielding complaints, a great deal of their interaction with your customers will happen over the phone. With the right training, your team will have the focus to handle any call, and make it work to your business' best advantage.

There are some really basic rules for getting the most out of your phone contacts with customers, even if the call began as a customer complaint. Sales reps can learn how to focus on how to up-sell and cross sell as well, ideas I'll return to later. The best way to do this is to develop a systematic way of dealing with phone calls. There are training packages around on how to do that.

Develop a Sales System

Just about everyone knows of someone they'd call a 'natural born' salesperson. And doesn't every business owner wish they had one on the team?

If you observe these people time after time you'll begin to notice a pattern to the way they do things - how they get the prospect interested, how they keep them interested, how they handle objections, how they deal with questions about price and how they finally ask for the sale. All in a way that builds trust and understanding with the prospect as they go along.

In fact, if you watched them often enough, you'd probably begin to recognize that they have systemized their routine - they have a 'sales system'.

Now it is actually possible to learn an effective sales system. We deal with one by a leading sales expert, Rick Solomon, based on a relationship selling approach. This is one of THE most effective selling methods which also has the added advantage of removing a lot of the discomfort many people feel about 'selling' something.

A systemized approach to selling based on effective sales method and shared by you and your team is a must have for increasing your customer base.

Research Your Market

To improve your return on investment in marketing communication pieces such as letters, advertising, emails and direct mail, a targeted rather than shotgun approach is very important. Your marketing should focus on a specific group of people who are the right type to purchase your product or services and give them a message they will relate to. After all, it doesn't matter how good your product or service is if people don't think they have a need for it.

So it's extraordinarily important to understand what makes your customers tick; if you are selling computers then you need to realize that the expert user with knowledge of software and hardware and all the technicalities is going to want different information than a person who just wants something easy to use for their email contact with family and friends.

The point is, to be able to arrive at this knowledge of your actual and potential customers, you need to do some homework identifying your main market segments and profiling them according to their interests - some market research. Then you can market accordingly in a much more focused and cost effective way.

Knowing and understanding their needs is essential to growing your customer base, whether it sells directly to individuals or to other businesses. Once you have that information, you can use it to persuade potential and existing customers that buying from you is in their best interest.

Develop a Promotions Plan

Think about your current spend on advertising and promotions for your product or service and ask yourself these questions:

• Do I have an annual budget specificially for these activities?
• Do I know how successful my advertising really is, that is, how much return on investment I get for my spend?
• Do I know which is the most effective form of advertising for me - trade exhibitions, newspapers, TV, and so on?
• Do I have a schedule, an annual diary, of advertising 'things to do'?

These are the sorts of things incorporated into a promotions plan - an outline of the promotional tools or tactics you plan to use to accomplish your marketing objectives.

Without a set plan based on some specific goals, and without a record of how past efforts have worked out, your advertising efforts must be, at best, hit and miss. To get more customers you need a plan for using the right media at the right time. There's no point in trying to win customers on a scattergun approach - it will just use up your advertising dollar without necessarily adding one extra customer and you wouldn't even know it.

Next Month: we will look at Step 2: Increase the number of times customers come back.