Smart business owners ask…and listen.
I recently saw a Twitter post (maybe one day “X” will stick) that I can’t stop thinking about, sharing 14 questions any business investor should ask .
The author, Michael Girdley, is an interesting guy — anyone who built a diversified $100M holding company on the back of a retail fireworks business definitely qualifies as “interesting” to me! Most of the questions in the post were about due diligence — how to help potential business investors more critically examine an asset, and the nuances of that asset (e.g. market, customer base, competitors, etc.).
A few of Girdley’s questions stood out to me:
“What happens if you raise prices?”
“Why do customers leave you? How do you know?”
“What’s the number one thing you can do to increase retention?”
While helpful for people looking to buy or invest in a business, we can easily flip the perspective and consider these questions from the POV of a small business owner who’s trying to grow, and think of the answers to those questions as strategic imperatives to implement.
Why do this? First of all, there’s a hell of a lot more small business owners trying to grow rather than sell their company. Secondly, these are critical questions every owner should be asking themselves and their team at least quarterly (if not more often). But, perhaps most importantly, these questions can provide clarity and measurable basic success metrics that businesses of any size can lean on.
Let’s look at each of those questions from this new perspective…
What happens if you raise prices?
What you’re trying to uncover here is a combination of market fit and customer loyalty. If you’re trying to grow without spending a lot, testing whether your current customers will pay more can help you understand how attractive a higher price point will be with new customers. Just make sure to share your rationale with your existing loyal customers — they live in the same world of inflation and challenging hiring situations that you do.
Basic Measurement: Average Order Value (Are customers buying more or less of your product or service after the price increase?)
Why do customers leave you? How do you know?
This should be fairly self-explanatory, but the amount of small business owners who can’t answer this question is staggering. If you don’t know where you’re falling short of customer expectations or needs, you’re behind the 8-ball. And while no one likes rejection or hearing a less-than-glowing review, asking hard questions does make life in business easier — way easier. Luckily, it’s simple to get started quickly by just asking for customer feedback. You can do it in lots of different ways, but creating a culture where feedback is welcome consistently improves business performance.
Basic Measurement: Net Promoter Score (A simple, time-tested 1-10 scale of whether or not a customer would recommend you to another customer. Pro tip: You always want to be trending up, so go the extra mile and follow up with simple surveys to understand why a customer gave you anything below an 8; people love talking about why their expectations weren’t met. This also works internally to track employee satisfaction, too.)
What’s the number one thing you can do to increase retention?
One quick way to find out the answer? You’ve probably already guessed it: listening to the feedback your customers give you is an easy place to understand how to improve your offering. If you want to grow customer lifetime value, i.e how much people will spend with you over time, engaging with customer feedback and making them feel personally listened to goes far.
Basic Measurement: Net Promoter Score (Yep, again. If you’re consistently scoring below an 8 from your customers, you’ve got to know why before you can get your churn rate down or repeat purchase order up.)
Smart owners will have picked up on a consistent theme here: talking to your customers is essential. If you’re an owner who is looking to grow your business, or at least not leave money on the table with your current customers, you need a plan to measure and attack these types of strategic imperatives. Lucky for you, Third Act obsesses over metrics like AOV or NPS so you don’t have to.