Growing Your Customer Base

Lifelong customers are as valuable as rubies — and as rare. The unfortunate reality of business is that customers come and go. In fact, the average business must replace 50 percent of its customers every five years.

Finding new clientele isn’t easy, especially in an uncertain economy. The key to success is to recognize that expansion is a process, not a one-time event, and it requires a multi-prong approach.

Use existing customers

The most cost-effective way to attract new customers is to have current customers do the legwork for you. Word-of-mouth marketing is good for any business, and is particularly attractive to small businesses with limited budgets and small sales staffs.

As a small building service contractor in Atlanta, E&F Cleaning Service lacks the resources to buy large advertisements or open multiple locations. What has worked for this small BSC, however, is referrals.

“Word of mouth works,” says Tim Everett, co-owner of E&F. “We’ve had an office manager leave and go to another office and bring us with her. We’ve also had someone put a note on the door of one of our customers asking us for a bid.”

Referrals often happen without solicitation, but sometimes contractors must ask for them. BSCs should let their best customers know they are trying to grow their business. Ask customers for the names of companies that have similar needs and see if they will make a call or write a letter of recommendation.

“What I’ve found over the years is if you do a good job, [customers] will give your name to other people,” says Leroy Paget, president of Acousta-Kleen of Central Florida in Casselberry, Fla. “You’d be surprised what a close-knit network these guys have.”

Leave flyers or business cards with customers to make the referral process easier. Also, consider an affinity program to reward references. For example, when a client’s referral leads to a new contract, give them a bonus service or a discount off their next cleaning.

When seeking referrals, don’t overlook past customers. As long as the contract ended on good terms, go back to these clients whenever a new product or service is offered. Old clients may be interested and if they’re not, they may know someone who is.

Another way to capitalize on current customer lists is through add-on sales (also called vertical sales). After BSCs prove themselves with basic service, sell the customer on additional services at additional fees. Common add-on sales include grounds care, window washing, carpet cleaning and graffiti removal.

“Our most attentive market is the current client base — why not figure out what else we can do for them,” says Jeffrey Packee, president and COO of CleanPower in Milwaukee. “We focus on making sure all of our clients know our whole list of offerings. They will not need all of them, but the goal is to have them remember [us] when the need arises. While we know we cannot be all things to all prospects, we want to be their first call.”

Prospect for new clients

Utilizing current customers should always be the first line of offense in expansion. And in the case of small BSCs, word-of-mouth marketing may be all that is required to maintain healthy profits. More ambitious contractors, however, use prospecting to expand their customer base.

Sales prospecting involves actively searching for new customers and it should only be attempted when a business is healthy and profitable. Trying to offset losses through expansion will only lead to more losses.

“It’s so imperative that your current business is on solid footing before you go ahead,” says business advisor Steve Kaplan, author of “Bag the Elephant!: How to Win and Keep Big Customers.” “If you don’t do that, it’s a minefield out there.”

Businesses with solid foundations should seek opportunities for growth. What they shouldn’t do, Kaplan says, is bear the risk of expansion. Instead of spending money on equipment or training in the hopes of landing new customers, use current skills to create a niche or to open doors into new industries.

Acousta-Kleen has done both. Started 22 years ago as ceiling cleaning specialists, the company first grew by creating a unique niche with little to no competition. It chose to focus almost exclusively on property managers because there were so many in the area. As a bonus, these folks often referred Acousta-Kleen to their peers.

“If you are smart and you see a pattern, you can leverage that expertise,” Kaplan says. “When you become a specialist and you get the lion’s share in a small market, it’s many times way better than being a generalist in a huge market.”

Later, Acousta-Kleen grew by expanding into new industries, focusing on one at a time. First, it sold its ceiling cleaning services to one supermarket and then another and another. When that market was saturated, it moved on to restaurants.

“Take a market at a time and saturate it with information about what your company does and how it applies specifically to their industry,” Paget says. “A shotgun approach doesn’t allow you to put the focus where it needs to be. Different industries have different needs and different things for you to focus on.”

Whether BSCs are establishing a niche or reaching out to new industries, it is imperative to court the right type of customer. The notion that any sale is a good sale is flawed — what will be the end result if your focus is quality but the client’s top priority is price?

To find the best matches, BSCs should start by interviewing their current customers to learn why they use their service. Once BSCs understand their strengths, determine which businesses will value them.

“You want to focus on the people who truly appreciate what you do that is uniquely better than anybody else instead of scrambling to talk to everyone who has a contract up,” says Bob Gordman, author of “The Must-Have Customer.”

BSCs should develop a list of potential customers and then narrow the field to only the most promising leads. Start with a phone call to determine their priorities. If customers are interested only in the lowest price, remove them from the list. Ask those who meet the criteria whether they have a contract up for bid. If they do, submit a bid; if not, keep them on file for follow-up calls.

This personal approach may be more time consuming than advertising, but it is less costly and far more effective. By targeting just a dozen or so businesses, companies can afford to send higher-quality materials than they could with a mass mailing. For example, create a nice quarterly newsletter with helpful property maintenance information.

“What you want to do is create top-of-mind awareness so when the moment is right, you are the first name that comes to mind,” Gordman says. “They may not need you today but tomorrow they could walk into the building and the cleaning was poor and they need someone else.”

Although this type of prospecting is less time-consuming than trying to hit up every business in town, it nonetheless requires a big commitment. To help with the chore, a BSC might consider hiring a full-time salesperson (or additional help if there is already a sales staff). This can be an intimidating step, especially for a small business with a small budget, but the greatest risks often deliver the greatest rewards.

“It’s scary economically, especially in these times, and it’s a scary risk,” Kaplan says. “If you knew someone would work out, you’d do it, but you don’t know. You could spend the money and have someone leave in a month.”

Despite the risk, Kaplan relented and hired three salespeople to help his marketing company (he had been doing the selling during the day, working at night, and sleeping just two hours a day). Within two years of hiring help, his profits grew sixfold.

Expand to a new area

Some BSCs aren’t settling with cultivating their immediate area for new customers and look to expand into new cities or states. However, this isn’t always the easiest path to take.

“It’s always more profitable and easier to manage business nearby,” Gordman says. “Whenever you move to another market, the business complexities become much more dramatic.”

Before opening a new location, BSCs need to research the area to be sure they bring something unique (price, quality, reliability) that sets them apart from the competition. They must have a reason to venture into the area beyond a desire to make more money.

Even with a unique selling point, however, BSCs should be prepared to prove themselves. Unless they have the funds to buy an existing BSC, landing the first account and earning a good reputation in a new place is difficult. Ideally, the first job will come from a current client that has a location in the new area. Or, current customers can provide strong referrals to businesses in the area.

When these options aren’t available, however, strategic alliances offer a way to ease into the new location. For example, if a BSC does floors but not windows, they can partner with an established window cleaning company to promote each other’s services. Just don’t get into a situation where one is competing against the other.

In the end, however, there is no substitute for old-fashioned hard work. It’s the same mentality as starting a business; a BSC must grow in the new location one customer at a time, using many of the same ideas laid out above.

“You need to be willing to hang up a shingle in the new market and become part of that community,” says Packee.

Becky Mollenkamp is a freelancer based in Des Moines, Iowa. She is a frequent contributor to Contracting Profits.