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The industry, versus companies in the industry

Knowing the cost to serve each client really helps

I am suspicious of 'unlimited.' it is meant to suggest limitless, but makes me wonder whether there is really an undisclosed limit, or worse still, a failure to work out what the limits are. 

Working with some advisers that are selling their business recently, we accidentally got to talking about the limits to growth - why the business had never grown beyond a certain point. The expected maximum business size is limited by your rate of new business generation and your rate of lapses. When these two are equal the business ceases to grow. Most business development coaching works on increasing the rate of new business generation, a few then look at lapse rates. 

But even before the new vs lapse limit is reached, often businesses cease to grow.

Then I got Seth Godin's piece about interaction debt in my inbox. I think this provides part of the answer. Many businesses never properly work out the cost of serving existing customers, and as the service requirements of those rise it reduces the time available for new business generation. It is particularly difficult to manage when the same person that is responsible for new business generation does all the existing business customer service. There are big advantages to that integration, but there are trade-offs too. Godin calls the servicing requirement an interaction debt. Focusing on it in that way highlights that it is unique interaction which is particularly costly. If that's appropriately charged, then there's no problem. If it is bundled with other costs one should periodically review it, as it is possible to get into a situation where revenue is insufficient to sustain the service promised.

I am particularly worried about the idea that a high upfront commission followed by a very small renewal should pay for an unlimited amount of future client service. That's a big promise. If you have run the numbers and you are happy with it, good for you. If you haven't checked, then you're just hoping it will be okay. 


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