Business Growth

This article will be more personal to me because of the path that I have been on for the past 4 years. Prior to March 2020, which we will all define in business as the “pivot point”, I was on a path of growth. That would be personal growth, which would also include business growth. I did not understand the enormous challenges that would lie ahead before a global meltdown in shutting down everything, I inadvertently opened up possibilities.

This did not come with risk. Business growth be damned.

I knew back then that what I was about to do was risky but I didn't see any choice. Here is a story of business growth from a small business perspective. Small, in the sense that we are too big to be small and too small to be medium. 

Identifying small business growth from a retention perspective

Small business growth is a fickle thing. My brick-and-mortar locations are next to your mom-and-pop pizzerias where the owner works 7 days a week. They are next to hair salons, dance studios, dentists, gyms, liquor stores, and Dunkin Donuts franchises.

In every scenario, there are people working in them, not on them, and business growth is a matter of just staying open and having a hand in everything.

Prior to the “pivot point” (shhhh don’t say the actual P word that is similar to Epidemic), I made a choice of moving my business from an owner who works in the business to an owner that just owns the business. There is nothing, I mean NOTHING worse than having everything fall on you. Most people start a business, present author included, and you do everything. Once I saw the writing on the wall, I knew that this was a terrible job. 

Imagine quitting your job and starting your own business. In your old job, you did everything and you didn’t get paid for the new responsibilities. You were miserable working those 40 hours (with a lunch break) and you quit.

So you start a new business and you do everything, work 80 hours a week (no lunch break), and barely make sales in the beginning.

Long story short: On Business Growth

My business, a music school, needed systems. So I built them

It needed employees, so I hired them

It needed training, so I developed it.

It needed new positions, so I started them and ran them at the same time as my others.

It needed accountability so I held meetings

It needed quantifiable goals, so I created them

It needed Managers, so I hired them

It needed software, so I created it

And on

At my pivot point (sounds like an Epidemic), I decided to take the big leap and let the business run itself. Here, a funny thing happened.

Our retention rate plummeted.

Meaning, the amount of time our customers were staying in a subscription with us dropped precipitously. It took years to understand this completely, and just recently, I along with my staff started developing a system to manage this.

You see, business growth only happens when you get a customer and keep a customer. For 4 and a half years, we were getting a customer and losing a customer. That’s not business growth, that’s business stagnation. 

It affects Revenue, 

It affects profitability

It affects my ability to earn.

We held a meeting in September of 2022, where the SOLE focus was retention. I invited all our employees to one of our locations for a 2-day conference. Surely this would work! We would tell them the problem, we would show them the fix, we would have great speakers… and this would all come at a very expensive price… but surely, this will work?

We would tell them the problem and they would help us fix it! (right?)

I’ll never forget it, I stood on stage and gave my keynote speech. There I laid out why it was important to keep our customers. It was funny, compelling, and, well, probably a good speech. 

I then declared this preposterous proposal: “If you keep all your CURRENT students until next year at this time, I will give you a $1000 bonus.”

They loved it!

They all clapped their hands. They said, “Wow!” 

They were undoubtedly psyched to get their bonus.

One year later, we were getting customers in through the door and still not keeping them. From the employees' perspective, it was a shoulder-shrugging thing. When you dug in a little to the numbers, there were 50% of our customers staying for 1 year plus. The other 50% were a combination of a few months to 9 months stays.

Then, you may have guessed it, emails were trickling in from employees:

“Where is that $1000 bonus?”

Remember, I stood up on stage and said, “If you keep all your CURRENT students until next year at this time, I will give you a $1000 bonus.”

All people heard was, “Next year at this time, I will give you a $1000 bonus”

I am a decent orator- I have learned how to speak to a crowd and know my audience. Here is what I have learned when it comes to employees: no one cares.

I mean it, and believe me these are good people. No one gives a shit- unless:

you make them understand until their eyes bleed.

You have to literally point to the goal every day. You are the reminder-in-chief. You, the self-managing business owner, have to repeat to your employees in the simplest of terms what the goals are and most importantly, have people be accountable.

This is how business growth happens in the service industry

1. Set Goal
2. Plan
3. Monitor numbers
4. Set accountability
5. Track
6. Make changes on the fly.

So back to the drawing board. We identified that our retention rate was 50%. I felt that acceptable churn yearly, given our business model, should be 10%. If we lost 10% our customers a year but grew our base by 30%, that would be a huge boon to our business. 

Reasoning Business Growth Churn 

Each week we were losing 7 subscriptions for a variety of reasons. Some we can’t help such as: “aging out of a program” (they finished)

Or

Financial reasons (hard to help other than lower costs which isn’t great)

But there were other reasons that we could prevent:

1. Loss of interest

This drove me up a wall for a few years. As an instructor in my program prior to just running the business, I rarely lost students. If I did, it’s because of reasons out of my control (above). Also, it wasn’t because I was so great. I made people feel good about themselves, I was always talking about the future and was a great coach. Losing interest is the worst thing that can happen to your customers and it’s literally your fault if a customer loses interest.

2. Too busy

Another hair-raiser. If they were too busy that just means that they don’t see the value in the program. I don’t see people deleting TikTok because they are too busy. I don’t see people quitting sports because they are too busy. Especially in sports, people depend on you. If you are too busy, you are off the team… and that’s embarrassing. People were leaving us because we didn’t make them care.

3. Schedule

I like to punch the wall when this one comes in. Right now there are no walls in my office anymore and my fists are balloons. We have customer service 7 days a week- literally no excuse for this. It means, to me, that a few things are happening and it has to do with the first 2 things (too busy, loss of interest). This is just an excuse. You can find the time if you care deeply about it.

We had long identified where our business growth could come from and it had to do with new customers plus keeping them. But we became complacent with the idea that sometimes people just leave.

Complacency is the idea that there is nothing that can be done about this. 

Weekly I was hearing, in my scheduled meetings with managers, about the churn and the excuses. RAGE was slowly building up inside because of the complacency. To become complacent, you accept things as fact when meanwhile there is a reality distortion complex happening. You accept the fact that we are losing people and nothing can be done about it.

IN this reality distortion field you begin to hear what people say and accept it as true

IN this reality distortion field you accept reality for what it is and don’t do anything about it

IN this reality distortion field you find ways around truth and accept the other “truth”.

So recently, I blew up the reality distortion field.

“ENOUGH”, I said.

Here is what we are going to do: (I said this to my managers)

“If 50% of our customers stay more than a year, our business growth will depend on the 40% that will quit. This is a must: start meeting with your instructors weekly. Go through the content they put in the student profiles. Most importantly- come up with a rubric to ascertain who will be a flight risk. Then, (I point to my GM Kevin) I need you to go through all the data. We know that customers who cancel late or no show are a flight risk, find those numbers. We also know that most students don’t perform in our concerts- find out who doesn't and get those numbers too on how many quit.”

A week later, Kevin put together the spreadsheet that is the King of all spreadsheets. 70,000 lines of info that has very interesting data.

We saw a clear line:

1. People that quit, never performed.
2. People who quit canceled or did not show a lot

Lastly, we figured out that our instructors knew students were about to leave… but weren’t telling us. During the meetings, the ones with the lowest grades in their rubric were starting to cancel!

We were on to something huge.

In the coming months, we identified all the students who had an internal score of 60 were flight risks and started a campaign to delight and keep them. This score is an internal rubric but get this: it’s 40% of our students.

That exact number we need to keep.

As the months go on, our numbers don’t improve much because people that are quitting have already made the decision to quit. Basically, the concept is that if they give in their termination form, it’s already too late. It’s incredibly frustrating to do all this work but realize after a year from the summit where we spent 2 days training our people, we were worse off than we were before.

All this comes to a head one day as I was signing off for work one-day last week. I see in our company chat a message from a desk agent who schedules customers to a person who teaches this line:

“Sally, your student won’t be coming today because they are suspended and won’t be back”

Fire. Complete fire.

This isn’t our policy, I think to myself. We ask that people give us 2 2-week notice before suspending. I then make a crucial decision from this understanding. I realize another issue that is hindering our growth.

Customers are leaving because we let them go. Policies aren’t being followed.

Oh my god.

We dug into the data and realized that we have no choice but to make people stay longer in a professional and somewhat sly way: a 60-day contract cancellation window. We start this policy with new customers and immediately get interesting feedback: Someone who is signing up says, “That’s crazy! Kids these days are so flighty, I don't know if they will like it!!”

The psychology behind this is clear: people need to be guided. Flexibility is fine in customer service but obviously, people like this need kind persuasion. Also, giving this customer the ability and freedom to leave whenever they want is only hurting us. 

I sent this to the desk agent: 

​​OK. This is an opportunity for persuasion. This is something that you can say to her:

“I get it, I mean kids these days, right? I’m sorry that the policy hit you the wrong way, but there’s a really good reason for it. We’ve been doing this for a long time and we know how to get people to perform well. So by sticking with this longer, it’s proven to show that the kids will get into it. Especially when you’re playing concerts. Especially when you’re going to our recitals. Especially when you see every week what’s happening in our portal.

Music lessons, from our perspective, need time. And we can guarantee one thing: we will show you the progress every single week.”

To the agent, “This is an opportunity to be persuasive and kind. But not to roll over because customers like this think that if they don’t see progress within two months, they quit- it’s ridiculous. so now that that option is off the table it’s important for us to remind & persuade, and to show what we’re doing, and be vigilant at every step of the process.”

So, you want a self-managing business and you want business growth?

It’s not easy as you can see. 

There are always opportunities to improve. There are always opportunities to take a look and see where you are going wrong. It takes courage to take a stand and point a finger at people only to realize it was you who was standing in the way the whole time. Yes, we need to trust our people. Yes, you empower them: but you can only empower so much. If you aren't getting results, it’s because something in the pipeline is off. You have to open it up and remove the blockage.

Question everything and never stop.