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Business Improvement Case Studies

Happy clients bring more business    

Overview

Daniel, Dave and Michael went to the same school and have been best friends for several years. As both Daniel and Michael had experience working for removal businesses, they thought it would be a great idea if the three of them could come together and set up their own removal business. In 2000, they began trading as “Excel Removal”, with only a ute and working capital of less than a thousand dollars. Excel Removal had a solid business plan with a set of clear and defined business missions. They set their niche on satisfying the needs and wants of each and every client, aiming to achieve both high financial results and an outstanding business reputation.
“Creating happy clients” became their principal business mission. They believed that happy clients would recommend Excel Removal to other people, with the benefits being more business and profit. Pleasantly surprised, Excel Removal was able to increase the size of its business within the first year of operation, a result of applying the “Happy Clients” mission statement. In mid 2001, they purchased two additional small trucks and began hiring extra employees. The benefits of using Excel Removal that couldn’t be found elsewhere were the methods they used to satisfy their clients and the quality of their services. Between the three of them, Daniel, Dave and Michael made sure that each and every customer was happy with their services.    
    
Issue

Even though they had doubled the size of their operation, demand for their services was still growing. However, they couldn’t afford to purchase any more vehicles due to financial constraints. This had led them to a situation where they were continuing to provide more services, regardless of their limited resources and capacity.
By attempting to sell more services despite their limited amount of resources, their schedule had become increasingly busy. As a result, Excel Removal started to provide “quicker” services, and sometimes avoided the scheduled vehicle maintenance. Their “creating happy clients” mission was being neglected. After a short time, they began to run late for appointments with clients, pay high vehicle maintenance costs, and sometimes damage clients’ belongings. This led to a growing number of complaints and a significant decline in profit and client-base.
    
Solution

Eventually, they realised that increasing their sales as a trade-off for quality was not the right approach, particularly when running a service based business. They decided to take corrective action to restore the quality of service that Excel Removal had built its reputation on. Firstly, they directly approached individual clients and offered discounts wherever necessary to encourage customers to return and use Excel Removal again. They were once again providing friendly service and excellent care for customer’s possessions as they had done in the beginning.
The incidents and negligence that were causing damage to client’s belongings was no longer acceptable at Excel Removal under any circumstances. To achieve this, they ensure each employee is supervised and appropriately trained prior to carrying out their work. The ute and trucks are now being serviced in accordance to the proper maintenance schedules to maintain reliability. In short, Daniel, Dave and Michael re-focused on supplying high quality services to achieve excellent customer satisfaction and rebuild their reputation.
After several months’ efforts in recovering its unique value, Excel Removal could finally gain back its reputation and maintained strong growth prospects. However, this time they made sure they would take appropriate action to capitalise on the potential of the business. In response to growing demand for their services, Michael proposed to get bank loans to finance vehicles and daily operations. Yet, since there was a complex procedure in applying for loans, plus time constraints, they thought it would be better to consider other financing options, such as leases. They planned to lease two utes and borrowed the amount of money required for funding the daily operation of the business from friends and relatives, deciding that the bank loan option would be considered later on.
    
Results

After refocusing on offering top quality removal services and leasing additional vehicles to satisfy growing demands, Excel Removal doubled its customer-base after one year. They increased their profit margin by about 15%. Daniel, Dave and Michael are now considering the possibility of expanding their operation to different regions across New South Wales.
Lesson Learnt
•    The attempt to increase immediate profit at the detriment of the quality of service often comes at the expense of future sales and profit.
•    It is crucial for business owners to understand that it usually takes years to build the reputation of a business and its unique value, but may take only a number of weeks or even days to scratch it when a wrong approach has been taken.
•    It is very important to analyse the costs and benefits appropriately when there is a change in a company’s direction, such as in the case of Excel Removal where there was a trade-off between short-term profit and quality of service.
•    Leasing assets may be a better financing option than purchase, if the business faces financial constraints during its growing phase.
 
This case study is based on a real business, however, some details have been changed to protect the privacy of those involved.

Source: SmallBizConnect NSW