How to Boost Your Customer Retention and Sell Your Business for More Money

How would you like to make 25-125% more money?

As cited in Entrepreneur, reducing customer churn by a mere 5% can increase profits by 25% to 125%. That’s easy to understand when you figure that the cost of acquiring new customers is about 6-7 times greater than satisfying and retaining current customers.

Customer retention is therefore one of the most important metrics for any business, especially if you are planning to sell your company in the future. Customer retention measures how many of your customers stay with you or repeat buy over a period of time and reflects your good service and their satisfaction. The higher your customer retention rate, the more value you can create for your business and your potential buyers.

You can compare your retention to others in several industries here.

What does this have to do with selling my business?

Customer retention has a direct impact on your sales multiple, which is the ratio of your company’s value to its revenue. The sales multiple reflects how attractive your business is to investors and buyers, and how much they are willing to pay for it.

It makes a SIGNIFICANT difference when dealing with private equity buyers and investors. Retention is a huge factor in their deal-making decisions because it shows that you can generate recurring sales with lower customer

acquisition costs, higher customer lifetime value, and higher margins. In other words—your business is built on solid ground.

On the other hand, if you have a low customer retention rate it means that you are losing customers faster than you can acquire them. For example, if you have a customer retention rate of 65%, it means that you are losing 35% of your customers every year. That means that you will have to replace all of your customers about every three to four years. This can hurt your sales multiple and make your business much less appealing to buyers.

So, what’s our strategy for improving customer retention?

At Volohaus, we do the following:

• Customer satisfaction surveys: these are needed to find out how happy customers are with your products and services, and identify areas for improvement. We use the Net Promoter Score (NPS) methodology, which is a simple but powerful way to gauge customer loyalty and satisfaction.
• Customer engagement: if you fail to communicate with your customers regularly and provide them with valuable content and offers, they will forget you. Sky’s the limit on how to communicate, but think email marketing, social media marketing, webinars, podcasts, blogs, newsletters, and other channels to keep your customers informed, educated, and entertained.
• Focus groups: we gather feedback from customers directly and in-depth to understand their needs, preferences, pain points, and expectations. We use online or offline focus groups to facilitate discussions among customers and learn from their insights and opinions.
• Customer Service/Client Success reps: a trained and well-managed team of customer service or client success professionals is a must for high retention. They provide exceptional support and guidance to customers and skillfully address their inquiries, complaints, requests and feedback.
• Onboarding: we constantly work to implement a smooth and seamless onboarding process for new customers. If you can step in their shoes and reduce friction points between the sale and onboarding, they are much likelier to stay and even brag about how great you are. A bad onboarding experience might lead to refunds, so show customers how to use your product or service properly, answer their questions and get them winning quickly.
• Training and role play: all customer-facing people in our company (and those we consult) role play handling customers. You can’t skip this, even for the veterans. This leads to a happier workforce because they can do their jobs better—and happier employees also contribute to higher customer retention (of course!)

Great customer retention can not only create a healthier business, it can turn a 2x multiple into a 3x or more. Well worth it!

If you need help with retention, isn’t it worth a 20 minute chat? Schedule here with Calendly.