More Customers Are Better – Except When They Aren’t

I need more customers!

So goes the battle cry I hear almost every day when I talk with business owners. Almost every single small business owner I’ve ever spoken with has said some variation of this.

And no matter how often I hear it, I just help but be bitterly disappointed.

Why?

Because in many situations a single-minded focus on getting more customers can be the absolute WORST thing that can be done. It can cause financial results to deteriorate – or even result in the outfight destruction of your business.

Now let me just say that I’m all for quickly growing a business to the point where it serves your Dream Lifestyle. But it is absolutely critical that you have your business model nailed down so your business creates money instead of consuming it.

Most small business owners (and you are most likely squarely in the middle of this camp) sincerely believe that the key to creating better financial results and growing their business is to get more customers.

The truth is that more customers DO NOT create better financial results. Getting more customers can be part of how better financial results are created (but often you don’t even need to do that). But simply getting more customers IS NOT the solution.

What counts is getting the right customers.

Once you have the “right” customer clearly defined for your business, THEN you can go out and get more customers that match the characteristics of your “right” customer.

So how do you know who a “right” customer is for your business?

There are three elements you should look at for each of your customers in order to determine which ones are the “right” ones on which to focus your efforts at improving your financial results.

1. How much they have purchased from you since they first became a customer;
2. Which of your products and services they have purchased from you (customers who have purchased more of your total “basket” of products and services are generally better customers from a profitability point of view); and
3. How frequently each customer patronizes your business.

Once you have analyzed your customers this way you will see patterns emerge.

What you are looking for are the group of customers that have spent a lot of money with you, purchased a relatively large proportion of your total basket of goods and services, and buys from you often.

Take a close look at this group of customers and try to determine specific characteristics that are shared amongst them (or a good number of them). For example, you may find that a large proportion of this group are customers who all come to you via a specific lead source, such as referrals.

Now you can step back and plan your growth based on better customers, not just more customers.