Your Valuable Customers

How much are your customers worth? Most business people, including owners of lawn maintenance companies, know the value of their equipment, their supplies and their employees. But they all too often overlook the value of the one dimension that keeps them in business, their customers.

To be sure, all lawn maintenance contractors intuitively know their customers are worth plenty. Quite frankly, without them, they wouldn't be in business. But when asked to place a dollar value on customers, don't be surprised if 90 percent of them not only underestimate the value, but miss it by a "country mile." 

Why? Because determining customer worth goes well beyond adding up gross receipts for a year or two. A customer's value is in direct proportion to tangibles such as how long they've been customers and how much it would cost to replace them, and to intangibles such as the role they play as silent promotional partners and the value they hold just by being familiar with the way you do business.

Knowing the value of customers is as important to the bottom line as knowing key financial ratios. More importantly, when positioned properly, this knowledge will serve as a reminder to everyone to treat customers as if their very business depends on it. And it does!

walker-talk-volume-04-6_1.jpgThe Tangibles

It's axiomatic: The longer customers are retained, the more valuable they become. A typical customer, for example, might be worth 30 mowing trips a year. Simple math says that at $40 a trip, that customer is worth $1,200. Keep the customer for five years and the figure jumps to $6,000. 

During those five years, most lawn maintenance companies will add a few additional services to the monthly invoice. A mowing job worth $40 might be supplemented by additional trimming or pruning service; aeration, overseeding and possibly dethatching; and fertilization and/or spring and fall installations.

For full-service firms, even the smallest maintenance customers have the potential to grow into sizable accounts. Factor in the growth potential and watch customer value increase; the $6,000 can double, even triple.

The key, however, is to retain the customer long enough to be able to grow the customer.

A customer's value increases even more when owners realize how much they're spending to replace those who've left. Included are costs associated with recruiting; e.g., advertising and other promotional activities; bidding and overall becoming familiar with a new property.

Intangibles

Take a moment to reflect on a two or three current customers and the differences that separate them from each other. Pets, gales, preferred mowing times and length of cut all fall into the "getting acquainted" category. In vernacular, it costs time and money to gel to know new customers and perform up to their expectations. Experts in the field have termed this the cost of establishing a "service script." 

In the lawn maintenance business, too, first-time properties have a tendency to need a little extra work. Do you charge for this work, or is this something you plan on getting back later? If it's later, then that customer has suddenly gone up in value.

Intangible worth doesn't end at a property's border. How many times have you said over the last five years, "My best form of advertising is word of mouth?" The truth is, the best of the best comes from customers who've been with you for years. There's a nip side, too; the worst kind of advertising is negative publicity, the kind you receive when a disgruntled customer leaves.

When lawn maintenance contractors say they're in this business for the long haul, what they're really saying is they're in this business to ensure their customers will be with them for a long time to come. Firms that keep their defections to a minimum are doing something right. Nine times out of 10, they're also operating at a higher profit margin than those firms forced to continually look for new customers.

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