The One NUMBER That Matters Most
December 6th, 2017 // 10:48 am @ Scott Manning
Today, we dive into the most important number you should know in your entire business… and I’d bet, though I’m an investing man not a betting one, that not a single person reading this knows this number.
It’s not Customer Value. Because, although it would be very few, there are smart business owners who know their customer value, but that’s where they stop and that is just not enough.
Knowing only that number is called: MISSING THE POINT!
The number you must know (which is found inside of customer value), is your Customer PROFIT!
How much of customer value do you actually get to keep, that doesn’t get spent on…
Getting them in the first place
The sales experience
The nurturing and education of the relationship
Your business overhead
Your team and employees
Your supplies and costs of good sold
And so on and so forth
After all of these are deducted, what is the profit left on each and every customer, client and patient?
Here is why this matters… Because they are not all created equal. Just because one is worth something doesn’t mean the next one will be.
Most businesses get customers at random, taking anyone they can get and never really understanding or taking time or knowing how to factor the actual profit that will be left from this one individual customer.
Everyone reading this knows that the bigger the pain in the ass the customer is the lower the profit will be.
I can tell you this unequivocally: any customer where an exception is made will always be the wrong decision. Because exceptions DIMINISH PROFIT and you are, after it’s all said and done, in the PROFIT BUSINESS.
That is your reality.
Here is an example I deal with my Doctors on an every day basis…
Every different type of patient is worth a different amount of money. Based on age, stage, interest and many other things. Plus you then have different categories of patients such as new patients, emergency patients, specialty patients, hygiene patients and so on and so forth.
The goal is to get new patients and then keep them, retain them in your hygiene or active patient base. The problem is after a new patient experience, whether or not the patient did any treatment, they are thrown into the ‘active’ patient fold and now just treated like a hygiene patient – even though they are still technically a new patient and you are still (or should be) working to build their value.
If you were to look at a new patient, they should be worth over a year $5,000 to $50,000 depending on the type of practice. But if you look at a typical hygiene patient just doing their hygiene visits they would be worth somewhere from $500 – $1,000 depending on insurance and effectiveness of the hygienist and such.
So if you immediately take a new patient and then on their next visit turn them into a hygiene patient you just destroyed the value creation of what should happen through a 12 month experience of nurturing, education and process designed to make them worth these larger numbers.
It takes 10 years to make a hygiene patient worth what one new patient should be worth if you switch their category. Of course, they go through hygiene but they should not be treated as just a ‘hygiene’ patient and no one should.
There are some practices who even look at hygiene as profitable when they have a patient who either won’t accept treatment or a patient who has been through all of their necessary treatment.
Instead they are losing money. Because they have suppressed (by their own decision and practice structure) their earning potential. They are keeping patients in the practice flow and stream of hygiene that is suppose to deliver opportunity but they have unqualified patients in those positions.
It’s a big problem and all day long these doctors will say they need new patients when they are their own problem because of how and what they do with new patients. They fill their practice up with patients that are actually losing them money by taking up space without opportunity to extract.
Know this: your customers are made more or less valuable by what you do, far more so than they are by who they are or where they come from.
There are a lot of different ways to make your customer more profitable and that is where your focus should always be.
In other words, what can you do to make your customers increase in value and become more profitable – not just your new ones but all of them.
Most business owners think incorrectly about profit… they think about it in terms of REDUCING expenses in order to become more profitable. Of course, this is obviously wrong because expenses (which are really investments), are what provides you the opportunity to actually create revenue so that you can have a profit.
If you reduce expenses, you are also reducing your earning power and potential. People who are focused on reducing expenses are just poor operators who do not know how to maximize the assets inside of their businesses.
And that’s where we are going to pick up next week… increasing profit and earning potential by optimizing our ability to create money faster.
Category : Blog
