There is Gold in Them Thar Hills

Years ago, I was a franchisee in a small home repair franchise. I had four locations throughout California and eventually built a database of 40,000+ customers. After years of successful operations, I sold the business. Every so often I touch base with the franchisee of my former business to find out how things are going.

As we all know, the construction business at all levels has seen a significant downturn in the last year. This franchise operation was no exception. One of the key expense factors in this business model was advertising, which traditionally was in the neighborhood of 10%-13%. With the downturn in sales, maintaining this level of advertising was difficult.

I was in the area a few weeks ago, so I invited the franchisee out to lunch. As we discussed his business, it became obvious that he had fallen into the 'advertising tar pit,' where dollars are traded for new business. The 'tar pit' is where franchisees get stuck and become extinct, much like dinosaurs.

It is generally accepted that loyal customers are your best source of high margin sustainable business. However, it is a lot easier just to advertise for new customers than to focus on existing ones. Why? I really do not know, but this seems to be a common flaw in entrepreneurial thinking.

Because I understood the business model, I asked three questions as we talked.

1. How large is your database these days?
2. What are you doing to mine this database?
3. Can you afford to continue to advertise for new customers?

The answers to these questions were:

1. Nearly 60,000.
2. Nothing.
3. No.

I suggested that he stop advertising for new customers and focus exclusively on the gold in his database. I was amazed at the light that seemed to go off in his head. Market to existing customers? What a novel idea.

Now, we all may chuckle at this, but reflect on your own situation. Even though we are not a B2C business model that markets to individuals, we should all have a database of business prospects we have called on in the last year. If you keep notes on your sales activities, which you should be doing, you will find that there is gold waiting to be mined in these list of prospects.

As I mentioned in blog posting last week, it takes 7-9 contacts to finally secure a new client. How many contacts have you been making with your list of qualified prospects?

Get out there and begin gold mining.