Saying “no” to new business – i.e. customers – sounds like an insane idea. New business means further growth, which means higher profits. Growth typically equals risky but lucrative choices, which are attractive to many new businesses. At some point thought, you need to sit back and decline new customers. But, it’s not as negative as it may seem.
It makes sense to decline new business when your focus is turned towards customer retention. Why? Because at some point, your workload will likely grow to encompass all your time. It doesn’t make sense to overload your team with new clients. Instead, try to keep the customers you have – entice them to return for new services or products.
According to research, a 2% increase in customer retention has the same effect as decreasing your costs by 10%. It’s a smart investment.
Furthermore, according to the U.S. Chamber of Commerce and U.S. Small Business Administration:
- The average company loses 50% of its customer base every five years
- Businesses are 4x more likely to do business with a returning customer than a new one
- The chance of selling to an existing customer sits at 60–70%, while it’s just 5–20% for a new client
Seeking out new business always presents a risk to your company. You must entice new customers to schedule your services instead of the competition. That means marketing, which costs money. However, there’s a chance the marketing campaign won’t work. Then your efforts have been for naught – and that is lost time and income.
In the banking industry, for example, professionals focus on containing excessive risk-taking. They consider a proactive approach, which includes smart risk-taking, profit sustainability, and diversifying business models. In other words, focusing on your internal structure.