Running a successful business is the goal of every business owner. Eventually though you will need to sell the company in order to move on to your next venture or to retire and sail off into the sunset Jimmy Buffett style. In order to obtain the most money upon the sale of your company,you will need to ensure that every aspect of your company is “.” Developing an ongoing, stable revenue stream comprised of satisfied customers is one of the most important things you can do to make your company buyer ready.
A couple of months ago, John Warrillow wrote an article for Inc.com called “One Question Can Predict the Future of Your Company.” In it, he discusses a common problem for all business: monitoring customer satisfaction levels.
We all know that our paychecks rely on customers. They’re the real bosses in the workplace. Without them, no one eats. It almost goes without saying, but understanding how happy or upset customers are with your brand is crucial to keeping your business afloat and it becomes vitally important as you look for buyers. It sounds so simple but many middle-market companies infrequently ask their customers if they are happy with their product or service.
Evaluating Customer Satisfaction
To find out how satisfied customers are, you might believe that surveys are a good first step. However, research shows that surveys often garner unsatisfactory results regarding the likelihood of repeat purchases and the referral of new customers. This is because companies frequently entice participants with a prize of some sort for completing surveys, which leads to phony answers because participants are not invested in the outcome—they’re only filling out the questionnaire for the prize.
Fred Reichheld, author of The Ultimate Question, has a better solution. He created the Net Promoter Score (NPS), which sounds like a complex system but is actually just one question: On a scale of zero to 10, how likely are you to refer a friend or colleague?
Zero indicates that a customer is most likely angry and will not recommend your business to anyone (a.k.a. “detractor”), while 10 means that a person thinks so highly of you that he or she will actively promote your brand (a.k.a. “promoter”). There’s a little bit more that goes into computing your Net Promoter Score, but I won’t get into that right now (for an explanation, read Warrillow’s article or visit Reichheld’s site).
Using NPS To Determine If You’re Buyer Ready
How does this relate to determining if your business is buyer ready? If your company has marginally more promoters than detractors, the business will be more appealing to a buyer than if your survey indicates that you have more detractors. A good Net Promoter Score indicates that chances are good you will have customers in the future, which is what buyers are really investing in. If you have more detractors than promoters, improving customer service needs to be top priority before you begin a search for a buyer.
Using the NPS seems easy and inexpensive for businesses to conduct. It effectively communicates the strength of the company’s network of promoters and it is a good measuring tool to determine customer satisfaction levels.
Have you had any experience with the Net Promoter Score? Will you consider using it?
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