New business success "guaranteed"

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We all know that new business is tough.

Prospective customers perceive that doing business with you for the first time is a risk. You know it’s not (I hope!), but they don’t. Even if they speak to your satisfied customers, it doesn’t remove the risk completely. “How do I know it’ll work for me?” they say.

To remove that barrier to new business, you must adopt some or all of the risk yourself. What do I mean by that? Well, in the above example, a two-month free trial or guarantee becomes a risk to the supplier, not the customer. You need to work out how many customers would cancel after the two months, versus how many more people you’d sign up by removing the risk.

A Low-cost Action Plan for New Business/Risk Removal

1. What risks does your prospective customer perceive in doing business with you? Here are some common ones:

• Will I get a return on my investment?
• Will you complete the job?
• Will you complete the job on time?
• Will you deliver the quality of products and services you agreed?
• Will you overcharge me?

2. How can you overcome each of those risks? Will you accept penalties for non-delivery or late delivery? Offer a free trial period? Or a money-back guarantee? How about a fixed price quotation?

3. Make a simple cost-justification for your new strategy, to further convince yourself it’s worth doing:

• How much extra new business do you think you would gain by removing the risk (based on past experience of lost sales or people who “did nothing”)? Make it a percentage, say 10%.
• How many of these new customers would you lose because you didn’t perform as you’d promised? Hopefully this is a small number.
• Even if you hadn’t given them a specific up-front guarantee, you would still have lost them if you screwed up seriously. Say 10% again, because you may get some time wasters who would ask for a refund anyway
• Annual profit from new business = total annual sales × percentage increase × average value × gross margin (for example 3,600 × 10% × $100 × 25% = $9,000)
• Annual loss from “returns” = new sales × return rate × cost per return (e.g. 360 × 10% × $10 = $360) - so the downside is only 4% of the upside
• You know it makes sense! Just by adding a few well-chosen words to your new business sales messages you can boost your profits dramatically.

4. Build your new risk removal strategy into your standard sales offer. Use it in all your mail and advertising promotions.

5. If no-one else offers this, make it a part of your Unique Selling Proposition.