MHC Investing 101: Measuring the Business You Lose
By John Ace Underwood and Tammy Fonk, Co-Founders of fillrateMHC.com
In the realm of business, measurable metrics are often the cornerstone of strategic decisions. Sales figures, profit margins, market share, and customer satisfaction scores are meticulously tracked to gauge a company’s health and growth potential. However, there’s a critical aspect of business that eludes straightforward measurement: the business you lose.
The Impact of Lost Potential Business
Potential business refers to opportunities that never materialize—prospects that don’t convert into customers. The consequences of lost business are profound, affecting a company’s revenue, market reputation, and long-term viability. The true impact is often underappreciated because it is not as visible or immediate as measurable sales and profits.
Revenue Loss: The most direct impact is the loss of potential revenue. Each lost customer or missed opportunity represents a revenue stream that could have contributed to the company’s bottom line, and in manufactured housing communities, that loss is ongoing.
Customer Acquisition Cost (CAC): Companies invest significantly in marketing and sales efforts to acquire new prospects. When business is lost, these investments do not yield returns, inflating the overall CAC and reducing profitability.
Community Reputation: Consistently losing business can damage a community’s reputation. Negative word-of-mouth from unsatisfied customers can deter new prospects, exacerbating the problem.
Competitive Disadvantage: Losing customers to competitors strengthens rivals and can erode a company’s market position over time.
Challenges in Measuring Lost Business
Quantifying lost business is inherently challenging for several reasons:
Invisibility of Lost Opportunities: Potential customers who never make a purchase leave little to no trace. They never call back to explain why they chose not to engage, they just disappear. Understanding why a prospect chooses not to engage with a company often leads to speculation.
Indirect Indicators: Companies must rely on indirect indicators like decreased market share, lower foot traffic, and reduced engagement metrics, which can be influenced by multiple factors.
Mitigating Lost Business Opportunities
While lost business can never be eliminated, businesses can implement strategies to minimize its occurrence and impact:
Process and Systems: People don’t run companies. Effective companies are run by systems, which are managed by people. Consistent success requires having a process, being committed to it, and continuously learning from it.
Measurements and Key Performance Indicators (KPI): Measurement leads to improvement. Implementing KPIs wherever possible can significantly reduce lost potential business.
Accountability: Business is often lost due to employee apathy, which stems from a lack of process, accountability, and leadership. Measuring all activities that impact desired objectives and holding people accountable can mitigate this issue.
Customer Feedback Systems: Implement robust feedback systems to capture the reasons behind customer churn and failed conversions. Regular surveys, exit interviews, and follow-up calls can provide valuable insights.
Market Research: Conduct comprehensive market research to understand market trends, customer preferences, and the competitive landscape, aiding in better decision-making.
Customer Relationship Management (CRM): Utilize CRM systems to monitor customer interactions and identify at-risk prospects early. Personalized communication and targeted offers can help retain these customers.
Continuous Improvement: Foster a culture of continuous improvement where feedback is actively used to refine products, services, and customer interactions. Encourage employees to provide input and reward those whose suggestions lead to significant improvements.
Competitive Analysis: Regularly analyze competitor offerings and strategies to ensure your business remains competitive in terms of pricing, features, and customer service.
Conclusion
Lost business, while challenging to measure, represents a critical area of focus for companies aiming for sustainable growth. By recognizing its impact and implementing strategic measures to understand and mitigate it, businesses can improve their competitive edge and ensure long-term success.
For more information on selling systems for manufactured housing communities, visit www.fillratemhc.com.