I’m assuming you are or will be comparing your actual 2011 results against your goals for the year.  Good for you!  But once you have that information I encourage you to take it one step further.

Long ago I learned how useful it can be to review or do what we called a “post mortem” on our best and worst results.  I do this every year for myself and not just my businesses.

By looking carefully at past results you can learn much to help you improve future results.  By looking over past project results at one technology company we learned important lessons that, in hind sight, would seem obvious.   We learned that the first project with an unfamiliar hardware platform or a new version of software always took longer than expected and had additional glitches to deal with.  We learned which engineers had the tendency to under estimate the time required to complete a project and which ones padded their estimates.  Moving forward we made adjustments for this.

Reviewing the past year’s highs and lows often reveal trends that are hard to spot at the time.  This has been a useful tool for me as a business owner, manager and a sales manager.  It has revealed useful data on staff idiosyncrasies, project pitfalls, product and service opportunities, price models, business partner performance, compensation packages, supplier performance and more.  All this information is useful in moving your business forward more quickly and profitably.

Take a half a day and review the past year’s highs and lows.  It’s a great way to prevent repeating past mistakes and do more of what you do best and most profitably.

As I work with clients to help them increase revenue a common question is “What’s a customer worth”?  If your answer is something like “the amount of a sale” you may need to look deeper.

To begin it’s important to understand the long term value of a customer in order to make good decisions associated with growing profits and your business.  How do you know how much to invest in advertising, marketing, and sales if you don’t know what a customer is worth?  Does it make sense to spend $1,000 in advertising to win a new customer if they’re only worth $500?  Not a good investment.

It’s important to know how much the average customer spends with you in a given period or time (year) and to know how long they remain a customer.  Knowing revenue per customer per year is good, knowing profit per customer per year is even better.  Sometimes there may be more than one calculation involved.  If you have multiple product lines or services you may want to do this calculation for each.

The important point here is know what the numbers are for your business.  As 2011 comes to a close, year end financial reports offer a wealth of information on the value of a customer.  If you know what a customer is worth business decisions become much easier to make and more obvious.  If it takes a $200 credit to keep a customer worth $1,000 a year, that can be a good investment.  And, there are intangible values that can be harder to measure.  Does the customer refer your business to others?  Do they offer advice or suggestions?  Do they pay a premium fee for a premium, more profitable, service?  Are they important in their industry and is that industry important to you?

Know the value of your customers and the answers to the questions above if you want to make even better business decisions in 2012!  It’s well worth the time and effort.

I often have deep thoughts while out in the woods running.  The idea for this post came to me on my weekend long run.  It has to do with, what seems to me, to be a shift in our culture to a “winner take all” mindset.  That, if one doesn’t win they aren’t good enough.

I was thinking about Steve Prefontaine.  Now he really was great but there is something interesting about Steve that, I think, adds to his legacy.  In 1972 Steve went to the Summer Olympics determined to do his best.  Notice I didn’t say “win”.  This is a huge distinction for a “winner take all” society.

For those who aren’t avid runners or don’t otherwise know Steve Prefontaine’s story he is a famous US distance runner but he never won an Olympic medal.  He did set numerous US running records.  In the 1972 Olympics he had a prime opportunity to win or place in the 5000 meter race for a medal, if only he had run to win.  But he didn’t he ran to do his best.

The 5000 meter race is about 3 miles long and during the Olympic medal deciding heat Steve’s competitors had the idea of running a, relatively, slow first 2 miles in an effort to have the race be decided by a sprint finish.  Now Steve was a very good sprinter and had he played the wait and sprint at the end game he would have almost certainly won a medal, maybe even the gold medal.  But Steve believed a 5000 meter race should be contested for more than the last 100 meters.

At the 2 mile mark Steve picked up the pace, a lot.  His competitors were forced to follow.  The rest is history and to understand it’s helpful to know that in running, as in most endeavors, it takes far more energy and effort to lead than to follow.  By taking the lead Steve Prefontaine didn’t win gold or silver or even bronze.  No medal for Steve as he finished 4^th.

Almost 40 years after there are some interesting lessons to be learned from Steve’s life.  First; only die hard running fans can name or remember who did win the 5000 meter Olympic gold in 1972, let alone who finished 2^nd and 3^rd.  By the way, a Finn named Lasse Viren won the gold.  Its 4^th place finisher, Steve Prefontaine, not Lasse Viren who has had the greatest impact on running lore being one of the most often referenced and quoted runners of all time.  Obviously this is NOT because Steve won or lost but because he gave it his best effort.

Now for the real point of this blog; what are you doing or NOT doing because you won’t be the best at it?  What makes the difference may be giving your best not being the best!  With that in mind what are you depriving yourself, your business, your family and your community of by holding back?  It’s okay to be 4^th, you may just create your own legend and that just might be your most valuable impact!

I just heard on the radio about how many billions of dollars the U. S. Postal Service is losing.  The amount is staggering.  The commentators explained that the losses were due, in large part, to fewer people using “snail mail” favoring e-mail and text messaging instead.

I was then amazed to learn what the Postmaster General’s strategy is for turning the losses around.  As I understand it the plan consists of two parts.  First is to reduce the number of post offices and curtail mail delivery on Saturdays.   In other words provide less to the receivers of mail services.  The second part of the strategy is to cater more to users of bulk mail services.  Or provide better service to those who mail us the receivers all that annoying junk mail we don’t want.

Based on this it’s clear to me the USPS’s mission is NOT to serve me or you.  In addition and as the Internet, email and mobile communication services become better and better at delivering desired messages to target markets their value increases while junk mail can only become less and less effective and valuable.  It seems to me that USPS’s strategy to focus on the one thing, bulk mail, which will not increase in value in the marketplace, is the worst possible decision.

Clearly the USPS is focused on those who send mail and not those who get mail.  Imagine for a moment if for the past 20 years the Post Office’s mission had been to get the receivers of mail the correspondence and information they wanted rather than delivering what others want us to have.  If you’re creative enough you could imagine the U. S. Postal Service, with this new enlightened mission, evolving into Google or something like it.  But that would be investing tax payer’s money rather than just spending it.

So, grab your billfolds and purses because with the strategy of reducing services and catering to bulk mailers this is only going to cost us all more.  Much more.

This post is about something I first learned from my running that I’ve successfully applied to building businesses, achieving business goals and achieving personal goals. I think it could be a useful strategy for solving our nation’s deficit.

I run very long distances, 30, 50, 60, 75 miles at a time or more. In order to complete these long races I’ve learned something very important. While it’s necessary to keep the entire distance or task in mind the only way I can successful complete these long runs is to break them into many smaller distances. When running a race I have a plan for the entire distance but focus only on getting to the next aid station. Aid stations are strategically placed 4 to 10 miles apart along the entire course. I can always complete another 4 to 10 miles, however, if I think of the full distance I have yet to complete I become discouraged and can even quit.

I’ve applied this same strategy to a variety of situations with great success. To extend the running analogy; often when I do get to the next aid station my view of the situation changes. I’m thirsty, hungry and tired but at the aid station I get something to drink, something to eat, get some encouragement from the volunteers. Now my perception of the task ahead has changed. The hydrated, fueled and encouraged Tom can see that getting to the next aid station 6 miles away is something I can and will accomplish. Had I only focused on the 20 miles to complete the event even the hydrated, fueled and encouraged Tom would want to quit, it’s just too far.

It seems to me that our politicians are trying to come up with a plan to solve the entire deficit all at once. Not surprisingly they are unable to agree on a strategy for such a huge endeavor. I suspect that if they shortened their vision to just the first “aid station” they could compromise and agree on a plan to begin. Once at that aid station there would be a new reality about the deficit. From that new reality with new information it should be easier to come up with another plan to reach the next aid station. Using long distance running as the analogy again eventually we can finish the race. Not without pain, not without discouragement, not without doubts, not without disagreements but we could finish none the less.

The important thing is to complete the task one step at a time. What daunting large task are you or your business putting off? Perhaps just breaking the task into steps and taking the first step is what you really need to do to get started. Try taking just a first step and do it today. You may be amazed at the positive results.

This is the story of how a regional bank is, in my opinion, wasting a ton of money on marketing and advertising because they set expectations they can’t meet.  There is a disconnect between what advertising promises, what the bank employees understand, existing bank policies and procedures and the expectations of the customer.

In this case the bank’s two promises are “Free Checking” and a promotion that pays the customer to open a new account.  I opened two new accounts with this bank, a personal account and a business account.  Life was good.

Immediately there was a problem.  I deposited money in the business account, wrote a check from the business account to the personal account then wrote a check from the personal account.  Because the monies had not been in each of the two accounts long enough a fee for each transaction was charged against each account.

The fees were small but now, to me the customer, this was NOT “Free Checking”.  To make matters worse had the teller understood my expectations and bank policies they could have warned me of the fees and I would have waited a day to write the checks and advertising’s promise of “Free Checking” would have remained intact.

The story continues.  At the time I opened the accounts I accepted the bank’s offer to provide me with free checks.  The checks for the business account never arrived.  I called my personal banker and being a good customer service person he said he would take care of it.  All that I asked was that the business checks not be the same color as the personal checks so that I could easily identify which checks belonged to which account.  Sure enough the checks arrived the next day overnight delivery!

The checks I received were the same color as those from my personal account.  And monies were deducted from my account for the “free” checks AND the overnight delivery.  Now I feel like my “Free Checking” is getting pretty expensive and that I’m not being listened to.  To my personal banker’s credit he noticed the mistake and credited my account.  I now like my banker again but still have checks the same color.

After a half dozen weeks I’m starting to wonder when I will get the money from the bank for opening these accounts.  I ask the banker and he tells me it takes up to 90 days for the money to be deposited into my account, a fact that was never mentioned during the sign up process.  To me 90 days isn’t an unreasonable amount of time but I would have rather known that up front.

After 90 days and about a week still no deposits for opening the accounts.  I call my banker.  He explains that because I opened the account shortly after the start of the month it would be the middle of the next month before I would get paid.  Now the payment for opening the account is starting to sound like a promise that might not be kept by the bank.  After another month I call my banker, again, and explain still no payment.  Now I’m confident I’m not going to get paid and I have nothing good to say about my bank.

Again my personal banker comes through and gets the monies into my accounts.  Disaster is averted.  However at this point I am no huge fan of this bank and if anyone asks I’m not encouraging anyone to switch.  A lot of marketing and advertising money was spent to win me over only to lose me during execution.

The bank employees are nice, hard working and by most measures very competent.  I have to believe the bank’s marketing promises and their costs were well thought through, they had a good plan.  It seems to me what was missed here is the bank asking what expectations they would be setting for their new customers and how they would then meet or exceed those expectations.  My guess is if someone at the bank had worked through the entire new customer process the short comings I experienced would have been obvious and could have, for the large part, been avoided.

Your take away from this is to go put yourself in your customer’s shoes and look at your business from their eyes.  Walk in the customer entrance of your building and check it out.  Log into the customer web site and see what that’s like for them.  Go through the process of opening a new account.  How did that go?  Ask your employees if they know what your specials or promotions are and why they’re special.  Make sure they understand what the promotion is trying to accomplish and why that’s important.  If you do this you might discover all kinds of improvements you can make at little or no costs.  Please, before you waste a million dollars on advertising make sure you know what your customers will expect and how you will fulfill those expectations!

Yes I think Sports Illustrated is stupid.  In this case not because of their potentially sexist swimsuit edition, or poor content but because of their business practices, specifically their marketing practices. 

I was a happy SI customer until one day not long ago I received an envelope that looked like it was from SI telling me that because I was such a good, long term customer I was eligible for a special gift.  I now know that when SI says “good long term customer” they mean “sucker”.  You see SI had sold my name and credit card info to a shady marketing organization. 

It turns out my “free gift” wasn’t free and was a cheap piece of junk to boot.  I was charged an exorbitant shipping fee of $90 for a couple of worthless trinkets.   Boy was I mad when I saw this charge on my credit card!

I cancelled my SI subscription and complained via their web site and received not one word in response to my polite complaint. 

If you assume that the scam marketer made a profit off of the $90 it stole from me and that they would have had to contact dozens if not hundreds of “marks” before finding a sucker like me we can assume SI received pennies per name for this list.  This leads me to the conclusion that SI values a subscriber at less than $1. 

The fact that SI finds me and my subscription worth less than $1 is the first reason I believe them to be stupid.  Another reason to back up this opinion I stated earlier; they never responded to my complaint at the time I cancelled my subscription. 

At the time this happened I predicted SI would take a third action that supports my belief that they are stupid and, unless they change their ways, headed for bankruptcy.  And I was right!  They are now spending far more than the $1 they sold my name for to win me back!

Their first of what I predict will be numerous efforts to get me to subscribe again included a huge discount off of my subscription and a free jacket with the logo of the NFL team of my choice.  The offer claims a value of more than $100 (like I would now believe them).

It doesn’t take an Ivy League MBA to figure out selling something for pennies then offering to buy it back for $100 is bad business and stupid.  Yes, Sports Illustrated is stupid.

I was recently asked this question and thought it a good one.  It’s something I’ve done and I believe there is an art to it. 

If a business relationship isn’t working for you I think you have three options; live with it, change the relationship for the better, or separate.  Let’s make the assumptions that you don’t want to live with it and that the heart of the problem with your customer is that you don’t make enough profit from the relationship to make it worthwhile or you no longer want to focus on the type of work you perform for them.  Either way the next step is the same.

The first step I would recommend is to raise your rates to the point that, if the client does decide to pay up and stay, you would earn enough that their staying would be a good thing.  This is actually the outcome a fair amount of the time and I think this a win win situation.   

The other happy outcome (for you) is that the customer decides to end the relationship.  If that is the case you should be prepared to offer suggestions on who might replace you.  Yes I’m saying you should be ready to recommend one of your competitors.   Keep in mind if you no longer want to do this type of work you’re not really recommending a competitor.  If they aren’t willing to pay your reasonable fees is handing them off to a competitor really a benefit to that competitor?  Probably not, don’t worry about it.

This is where I remind you that you want to take great care with all of your customers, even those who will soon be past customers.  If handled properly they may continue to be a source of referrals and may someday change to the point that they want to come back.  It’s not unusual for a customer to reject your rate increase, leave for another provider, only to learn that you were far more valuable than they thought.  They just may come back happy to pay the higher rates for your superior service. 

I’m NOT suggesting that you dump a former client onto a provider you know is incompetent, unethical, or unable to perform the work. 

The conversation with your customer should be face to face if at all possible.  It is best to thank them for being a customer telling them that you appreciate their past business.  Further explain that your business model has changed and that either you no longer can provide what they need or that you can no longer work at your current rates.  You may even what to cite some of your increased costs as why your rates are increasing. 

If they are unable or unwilling to pay the higher fees tell them you understand, that you will miss them and that you have a suggestion on who may be able to help them moving forward.  This is where you recommend another services provider.  End the conversation by extending an invitation to come back should they ever want and let them know they would be welcomed.

This year my Holiday customer service experiences were varied and included traditional retailers, to Internet retailers to oligopolies.  I’m an entrepreneur and capitalist so you shouldn’t be surprised that I found the oligopolies the most difficult to work with.

But let me start with some good news.  My experiences with traditional brick and mortal retailers were delightful!  In particular I found the clerks at J.C. Penny to be helpful and friendly.  Lines were long but moved right along in a very efficient manner.  When it came time to make the usual after Christmas exchanges Penny’s made the experience almost enjoyable by offering additional discounts.  In the end we exchanged $100 in merchandise for $200 in merchandise by paying only an additional $50.  Honestly I was pretty wowed!  J.C. Penny gets an A+ and I have to say I wouldn’t have expected that.

My online shopping experiences were typically good.  Amazon and the other online retailers I use have highly evolved customer service systems that work.  As you would expect I was made aware of delivery times before making a purchase.  Then I was updated as products shipped.  Everything happened as expected.

Oh but the oligopolies.  What a different story.  In this case we are talking about Comcast and Verizon Wireless.  Allow me to disclosure, neither of these transactions was mine but were by people I know well and trust.  While both experiences were very similar I only have time here to share the story about Verizon Wireless.

A long time Verizon Wireless customer and friend of mine wanted to update her phone and add a phone for her teenage son.  After calling the 800 number on the Verizon web site she had a long and, what she thought was, a productive conversation about what phone would be best for her.  She had a very few, but critically important, things she wanted the phone to do and not do.  Satisfied that Verizon understood her needs she ordered the phones they recommended and agreed to the mandatory 2 year extension to her current Verizon agreement. 

But then the phones arrived.  Her son’s phone worked well for what he wanted, texting and talking.  Her phone however was another matter.  After an extended free tech support call it seemed the phone would not do what she wanted the way she wanted, this despite Verizon’s earlier assurances it would.  

My friend and her son got up early the next day and went to the local Verizon Wireless store for help.  After waiting in line they were told that, because they ordered the phone direct from Verizon, they would have to pay $40 for help and that then there was no guarantee that they could get the results she wanted. 

Leaving the store my friend again contacted Verizon direct only to discover that her options were to; #1 keep the phone and deal with it, #2 return the phone for a $35 restocking fee, or #3 upgrade to some other phone.  And, just to add insult to injury, there was no way she could get out of the 2 year contract extension without paying the full penalty for doing so regardless of which option she chose. 

To summarize; my friend consulted with Verizon’s own staff on what phone would fit her needs.  They recommend a phone that they then could not make work to her needs.  She then asked the local Verizon store for help.  They would only help her if she paid them.  She then tried to return the phone only to find that Verizon would not stand behind their own recommendations and would charge her to return the phone.  And she could not get out of her contract extension without paying a penalty.  Should anyone at Verizon Wireless every wonder why customer service rating are so low (doubtful) here is a case study.

These experiences got me thinking.  Internet retailers like Amazon have set new standards for customer service.  Organizations like J.C. Penny have been forced by Amazon and others to improve their game.  My experience this year was that J.C. Penny has done so and done so where Amazon can’t, with the personal interaction between clerk and customer. 

The oligopolies have no such competitive pressure and so have not improved their game.  As Internet phone and TV services become more available, reliable and familiar I wonder, and hope, that this will provide the incentive the oligopolies need to fix their badly broken customer experiences.  Or, will this be another example of too little too late?  Either way I think the consumer wins and capitalism is alive and well.

In my business to business sales career I’ve learned to use risk as a tool to set expectations, position my price and protect my profit margins. It’s a simple tactic that can work for you too.

When quoting a project my company would offer three levels of solution and offer to structure which ever solution the prospect selected one of two ways. We would either do the project on a not to exceed fixed fee basis or on a time and materials basis. The fixed fee quote would always be higher than the time and materials quote.

I would explain that the difference in price depended on who took the risk for the successful completing on the project. If the prospect wanted to take the risk that if something unexpected happened they would pay more I would let them.  Of course if the project took less time than expected they would pay less.

If they paid me more for the fixed fee it was up to me to make sure the project was completed on time and within budget. If not I covered the extra cost because I took the risk. On the other hand if the project was completed more quickly I earned more. The higher up in the organization the decision maker was the more this resonated with them. Business owners understood what I was saying immediately.

This is a very useful way to position a project with a prospect for a number of reasons. The fixed fee gives you the opportunity to set your price based on the value of the project’s successful completion. It gives you a way to move the discussion from how much do you charge per hour to what is the value of the successful completion of this project. If you can move the discussion from the value the prospect will gain rather then the price they will pay you should be in good shape to win the business.

Having this conversation with a decision maker can also help to avoid awkward conversations later. After this talk it’s harder for a prospect to complain that a time and materials project has cost too much and if they do you have a ready response. The risk talk also helps avoid questions like “Will it cost less?” when you’ve completed the project early.

If you currently don’t use fixed fees my recommendation is try it but start with a project you know well that doesn’t have variables you haven’t worked with before. Be confident you can do the job well for the fee quoted. Finally if you and your organization assume the risk for a project you have to perform. Doing so can help you get better, keep sharp and stay competitive while protecting your profit margins and increasing revenue.