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Edition 240 – Contact Tracing

Who’d heard of the term “contact tracing” before March 2020? I certainly hadn’t and yet, here we are, six months later, and all of us know what it means and the importance of it in living in a COVID world.

There is another form of contact tracing that family business owners should be engaging in and something that I’ve advocated for a long time.

Most family businesses don’t understand:

  1. Who their clients are.
  2. Where they first came from.
  3. Why they became a client.
  4. The value of the relationships the business has with other clients and potential clients.

Recently, when working with a regionally based family business client, as we planned the next phase of their business journey, the following dropped into the conversation:

CLIENT“We had a great new client the other day. They’ve proven a very valuable addition to the business.”
ME“How did you come across them?”
CLIENT“They’re a referral from an existing client located in Sydney.”
ME“How did that client come to know you and your business?”
CLIENT“We don’t know!”

“We don’t know!”. I almost fell of my chair at both the simplicity and sheer honesty of the response.

Ironically, these are the clients that are one of my greatest referral sources and I can contact trace the cluster of all work they’ve referred to me over the years.

Family businesses make this mistake every day of the week. They take on new clients, yet don’t know where they come from or how they’ve come to know about their family business in the first place. As such, family business owners and managers are flying blind in terms of:

  1. Why they are attracting customers; and, therefore,
  2. What their most effective form of marketing actually is.

If you understand where your clients come from, and how often they are referring, then you quickly come to understand:

  1. Who are your best customers?
  2. How they willingly become advocates for your business.
  3. What you are doing right – and how you should be doing it more often?
  4. How your customers view you and what your family business does for them, through their own eyes.
  5. Who your ideal customer truly is.
  6. What their average spend is.
  7. How profitable they are to your business on a “Per Client” basis as well as a “Per Transaction” basis.

You’ll also start to understand the importance of Customer Clusters. As we know, “like” tends to refer “like” or hang out with “like”. So, if you’re successfully targeting high net worth individuals for a certain aspect of your business, then by knowing how you’re getting your message across, you’ll understand how you’re able to convert a Single Customer into a Customer Cluster. You’ll also start to understand the importance of building relationships amongst influencers in those Customer Clusters and how their advocacy for your family business will build long term relationships, profit and goodwill.

So, next time a new customer graces your front door, spend the time finding out who they are, where they’re from and why they made the decision to deal with your business over your competitors?

If you can trace the source of your new Clients and the value of your Customer Clusters, it’s my honest opinion this could have a significant impact on the valuation multiple applied to goodwill in family businesses.