Entries from March 2012 ↓

Learn From An Angry Customer

My service manager just passed a letter to me. It came from an irate customer. I think the customer is dead wrong, and just blowing off steam. What do you think I should do?

Thoughts of the Day: Whether your company is right or wrong, this customer just did you a favor. Think about the reasons listed in the letter. Decide who’s accountable for the loss, and make them become part of the solution.

Every lost customer is an opportunity to learn more about how your company handles itself. Consider this a wakeup call. Even if you can’t get this customer back, you can try to figure out who’s likely to leave next, and what to about it.

Because this customer just wrote a letter, the door to communicating is open. Seize the opportunity. Write back, and follow it up with a phone call. Minimize damage from this loss as you learn what to do to insure future customers stick with your company.

Let the customer know you appreciate the feedback. Say that it’s not the policy of the company to frustrate customers, and that you want to learn more about what happened. Even if the customer is in the wrong, find out why there’s a mismatch between customer expectation and your company’s ability to deliver.

Get to the bottom of the disconnect. Check out all notes on previous transactions. Ask yourself, and your employees a number of questions.

  • Should your company have taken on this customer to begin with?
  • Did the relationship shift from good to bad, and if so, what caused the shift?
  • What did this customer need that your company couldn’t supply, but could supply in the future, and how could your company make money doing so?
  • What would it cost to get the customer back, how long would they stick around, how much would they buy, at what profit? Is it worth trying to get them back?

Perhaps your staff didn’t understand how to take care of the customer. Or, they could have thought the customer’s requests were unreasonable and they acted to protect the company. Whatever the reason, make sure that employees understand the cost of the loss and become part of the solution for making it up.

When sales is charged with getting customers, and operations isn’t charged with keeping or replacing lost customers, a revolving door can open up. Work comes in the front door, and quickly goes out the back door. Sales costs increase as word gets around that your company has problems keeping customers. Opportunity to disperse the cost of sales across multiple orders is gone as customers quickly pack it in.

Instead put performance review measures in place that make people in operations take the hit for lost customers. Have a hand-off process between sales and operations when new customers come on board. Once operations accepts the customer, it’s their baby to keep.

Consider if there’s a need for training. Do people in operations make the connection that customers pay for their jobs to exist? Do they have the skills to communicate effectively, especially when there’s a problem? Can they conduct diagnostics and create alternate solutions?

Make operations responsible for the solution. You may want someone outside of operations to do the direct research with the customer, to avoid head butting and to get accurate feedback. Once the feedback is in, however, turn back to operations and ask how they’re going to make up for the loss. What can they do to expand other customers? Do they need to cut back personnel to preserve operating margin?

Looking for a good book? Strategic Customer Service: Managing the Customer Experience to Increase Positive Word of Mouth, Build Loyalty and Maximize Profits, by John A. Goodman.

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Bank Won’t Deal With Me

Need help dealing with the bank. Next few months will be tough. Cash flow is already tight and taxes are coming up. If I had a bigger credit line to draw on, I’d be more comfortable, but my bank says there’s no point applying.

Thoughts of the day: Pay attention when the bank tells you there’s a problem. Short on cash – do you know why? Cut out costs, then push on sales to get past breakeven. The economy is turning up, but don’t expect gifts.

Money is available for companies that can prove they’re a credit worthy risk. Banks have loosened up from the days of 2009-2010. Many banks are focused on what is their best customer. It’s worth your while to find a banker who understands your industry.

Banks look for a few things. Three big ones are collateral, profits, and a Quick Ratio. Inability to meet a bank’s standards indicates your business isn’t as strong as it should be.

What’s a Quick Ratio? It compares Current Assets / Current Liabilities. Current assets include cash, checking and savings balances, inventory and accounts receivable. Current liabilities include accounts payable and lines of credit. Banks expect you to have twice as much (200% or better) in current assets as you have in current liabilities.

What can you do to improve your lending profile? Put money into a savings account every week – start small, build up. Don’t pay down credit lines too quickly – instead term them out – that pulls all but the current year’s portion of the term loan out of Current Liabilities, thereby improving your Quick Ratio. And it gets the loan paid off. Be willing to pay taxes – it’s a demonstration that your business is profitable.

If you’re short of cash, ask why. Sales down? Costs out of line? Too much overhead? People not paying their bills? Too much spent on upgrading – facilities, equipment, etc. – in too short a period?

Take control! Don’t spend a dime more than you have to. Cut back on space, supplies, excess equipment, extra hours of work. Every dollar saved brings you closer to having a profile that the bank will appreciate.

Ready to get creative? With rising gas prices, consider telecommuting, watch your electrical usage, and make sure the office is energy efficient. Go through vendor bills with a fine tooth comb. Don’t be afraid to question things.

Make sure that you get paid every cent that you’re owed. Some customers play the game of negotiating discounts at the end of a job. Stand firm.

Cleaning up accounts receivable is like finding money. Charge interest. If older customers delay payments check their credit rating. New customers – always check their credit before extending terms. If anyone is a poor credit risk demand significant upfront deposit and final payment before you deliver, or be willing to walk away.

Send out invoices weekly, or even daily if they’re big enough. Use email instead of snail mail. Call customers to confirm receipt and get a payment date.

Raise prices. It’s time! Shift marketing dollars to internet based strategies – they’re often less costly, and much more efficient to implement. Whatever you do, don’t cut out marketing – it’s the key to future business opportunities.

Go after new sales, but be strategic. Target profitable accounts. Ask for more upfront – if you’re used to getting 10% down, ask for 25%; if you get 30% down, ask for 40%.

Having cash available will let you sleep better at night. Use cash reserves to free yourself from time wasting activities. No more time spent figuring out how to pay today’s bills. No more running around to collect payments because you can’t wait for someone to mail the check in.

Prove to the bank you’ve cleaned up your act. Ask your banker for suggestions of what they look at. Then build it for them and for yourself. If you don’t understand what they’re looking for, or don’t know how to get there, don’t give up, get help.

Looking for a good book? Making Cash Flow (Managing Your Money) by Christine Thompson-Wells.

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Working with a Spouse

It’s a family business, all right. My spouse is in the thick of it with me, pitching in wherever help is needed. Not only do we get to have breakfast together, but lunch and dinner, too. She has a lot of good advice, but sometimes she and I don’t see things eye to eye. And sometimes it feels way too close. Any suggestions for maintaining marital harmony as we deal with the ups and downs of our livelihood?

Thoughts of the Day: Know who’s responsible for what. Make sure the business can afford to support both of you. Be the diplomat, but settle disagreements, or agree to disagree. Have a written plan to follow, and hold each other accountable for meeting deadlines and standards. Regularly check in: is this what you both really want for work. Schedule down time and time away from the business.

Who’s business is it, anyway? Yours? Your spouse’s? Or equal shares? Decide, and issue voting shares of stock to confirm the decision. Then decide on an organization chart, and lines of authority. Who’s good at what? Think it through and make job assignments accordingly.

Once jobs and lines of authority are assigned, respect them. If it’s not your turf, don’t go butting in. If you think your partner is heading for trouble, ask if help is needed. Make suggestions, but back out if you’re asked to. Be willing to listen to your partner talk through challenges, without giving out orders about what to do next.

It can be really hard to let go and watch someone else make mistakes or struggle. Keep in mind, you’re not perfect, either. I’m sure you have your own laundry list of things that have gone wrong. Allow your partner freedom to experiment, get it wrong and figure out how to recover – that’s where the best learning can come from.

Listen attentively when a partner has something to say. Allow for differences in communication style: men and women tend to tackle problems differently. Set up rules for how to resolve disagreements, and then follow the rules. If you strongly disagree, get an outsider to provide advice and support.

Think about why you’re in the business together. I hope it’s because you both realize that 2 partners pulling together can grow a business significantly faster than 1 owner going it alone. Make sure that there’s enough revenue and profit to pay both your salaries. If one of you ends up working “for free”, that’s a warning sign that the business can’t support both of you. Consider having one of you take a sabbatical and get another job that pays better. Don’t put all of your eggs in one basket, if that basket isn’t strong enough to support you both.

Make sure you’re both heading in the same direction by writing out goals and plans for reaching those goals. Meet regularly to review the plans, to be sure the business is on track. Assign accountabilities in writing. When there’s disagreement or breakdown, set aside time to discuss it when you’re cool headed.

Conduct regular reviews with each other, just as you should do with employees. How is the job going? Is it still a fit? What do each of you want to learn about and do next? Train your replacements so that if either of you wants to step back you can. Make sure someone else can replace both of you, so if either of you gets sick, it’s not an emergency.

Regularly take time off from the business. Set a rule that no one talks about the business after a certain hour in the evening. Take weekends off. Plan vacations. Have a hobby to pursue outside the business. It’s important to recharge, especially when so much of the day to day conversation is likely to be focused on the business.

Looking for a good book? Sleeping with Your Business Partner: A Communication Toolkit for Couples in Business Together, by Becky L. Steward-Gross, Michael J. Gross.

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Not Enough Feedback Going Around?

I’m concerned that employees don’t get enough feedback. And I fear that doing reviews could open an ugly door. Some people might not like what we have to say, others might want a raise – which I’m not willing to give.

Thoughts of the Day: Feedback should be given continuously. Reviews are recaps of feedback, and do not have to be tied to compensation. But compensation should be tied to performance. Use feedback to help employees grow and improve.

Teach managers how to give feedback. Read a book. Discuss feedback at weekly meetings. Ask for examples: who met with whom, what worked, what didn’t, what did / didn’t get said. Be careful not to shoot the messenger if anyone brings up problems they encountered. Identify “success examples” to emulate.

Encourage managers to speak with employees honestly and empathetically. According to BusinessPerform.com, employees need to get from internal communication “a sense of belonging and self-worth – being listened to, respected, trusted, valued “. PattyInglishms.hubpages.com says that Lack of . . . Respect and Lack of Recognition are 2 of the 10 reasons employees quit their jobs.

Review with your managers the concept that success is celebrated in public, while negatives are discussed in private. Make sure managers take time to recognize employees who do well. And when things go wrong verify that managers pull aside the person involved to discuss what happened. Remind everyone that performance can only be sustained and improved if people are given accurate feedback.

Many of us are uncomfortable delivering bad news. We don’t like looking someone in the eye and telling them they just screwed up. Sometimes we get busy or just plain overlook opportunities to recognize good performance, saying things like, “Well, they should know they did a good job.” Unfortunately, lack of feedback only leads to repeat mistakes and lack of respect as employees assume that no one cares. And who needs that.

Talk with managers about the dangers of not giving feedback: decreases in customer satisfaction as problems go uncorrected, declining profits as errors mount up, higher turnover as good employees get frustrated and quit.

Now let’s talk about reviews. They don’t have to be complicated or time consuming. Ask managers to keep a file folder in their desk for each employee. Each month, have managers put performance notes in each file. If you’re concerned that managers won’t take time to complete this assignment, set aside a monthly meeting for managers to get together, bring their files, write up their notes.

At review time, have managers meet with each employee for an hour. Encourage a 2-way discussion: How are things going from the employee’s point of view, from the manager’s? Conclude the discussion with a written list of development activities for the employee to pursue, initialed by both manager and employee. Drop the development list into the employee’s folder. Check on progress regularly.

One final note: reviews should not be a surprise to the employee. If feedback has been honest all along, the review will simply be a restatement of what’s already been discussed.

Tie compensation to performance by linking measurable outcomes to how a person is rewarded. Want to boost output? Pay a bonus if output exceeds a set minimum. This approach doesn’t require a review to measure and reward performance. But it does reinforce the importance of performing to a standard in order to earn a higher level of compensation.

Finally, remind managers that a written record is essential to good management. Our memories can be faulty, and subject to “squeaky wheels” or “recent impacts”. Setting aside to reflect on performance over time, with monthly notes and agreement on where to focus next, is an opportunity for the company, manager and employee to develop skills and build rapport.

Looking for a good book? Where’s the Gift? Using Feedback to Work Smarter, Learn Faster and Avoid Disaster, by Nigel J. A. Bristow and Michael-John Bristow.

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