Day 18

Lock customers in!

Contracts aren’t possible in every business sector, but if they are, try to get them in place and make sure they’re transferrable with the business when it’s sold; this locks in your customers and, the more locked-in they are, the more secure your future income stream is. For obvious reasons, buyers really like that – it gives them confidence about future sales.

If it’s not possible to get customers to sign long-term contracts, the next best thing is to encourage them to spend regularly with you. Buyers will apply a bigger multiple to a business with recurring income rather than one in which every sale has to be generated from scratch.  Some businesses (like accountants) have recurring income, whereas other, like retailers, tend not to – forecasting turnover will always be more difficult when income is non-recurring.

Think about how you could build recurring income; could you charge a monthly fee to customers and, if so, what for? Could you offer annual service contracts or annual updates? What about memberships, or subscriptions – anything, in fact, that would result in a steady, predictable monthly revenue stream?

How else could you encourage them to spend money with you on a more regular basis? Offering complementary products and services can be a good idea. If you sell coffee machines, for example, launch a coffee club and sell coffee to them, too. Someone might buy a coffee machine only once in a blue moon, but coffee – they’ll hopefully be back time and time again with a monthly subscription package. If your customers trust your brand because of the relationship they’ve already got with you, they’re quite likely to buy other, related things that you try and sell to them.