Part 3: Increasing Your Client’s LTV Through The Production System

This article is part 3 of a 5-part mini-series I started a couple of weeks ago. I’ll do a quick recap to get you all caught up. Sounds good?

Here they are:

Part 1: The 4 Systems Every Business Owner Should Know About

Part 2: An Inside Look On the New Business System

Long story short: on my first article, I wrote about how business owners should think of their company as a machine. It’s made out of systems –4 of them actually– that are both dependent and independent from each other.

So, what are they?

On that post, I gave a bird’s eye view of all four: New Business, Production, Back-Office, and Finances.

I also mentioned that you might start being in charge of the whole thing –and that’s okay. As you grow, the natural transition is to assign specialists to each one.

Due to the positive feedback that article received, I decided to follow-up by closing in in each system individually. 4 systems, 4 in-depth pieces that examine how we manage them at Jakt and how you can too.

This works like a superhero movie: you can watch this film alone and understand it, but you get more context if you’ve watched the last one. So feel free to check it out (I’ll wait).

But just in case you haven’t read it, the first system I touched on is the New Business. Basically, it covers all the steps between generating leads and closing them into clients.

But what’s next?

The Production System

Simply put, the production system is the system that controls the implementation of the work that was agreed upon..

Let’s say you run a web development agency.

Your New Business System brought in a new lead –a law firm, for example.

They’ve asked you to build their company’s website from the ground up. You all determine a fee for the project paid when after completion.

You send the contracts over, and they sign them. At that point, they are transitioning from the New Business System to the Production.

These are the 4 steps that follow:

Step 1 – Start the engagement.

Ideally, the first time your client meets someone from your production team should not be AFTER signing the contract.

Quick note: for “production team”, I mean the people in your company (or yourself if you’re flying solo) that are in charge of the deliverables. In this case, web developers and designers. But people are only 1 out of the three elements that give you leverage.

Anyway, introducing a member of this system during the sales meetings can help you have a very smooth transition. This is what I meant by all systems working together, by the way.

I mean, think about it. If you were a client, you wouldn’t want to feel like the sales guys are “throwing you” around, right?

Also, getting to know and hear from the actual experts will instill confidence in your prospects.

Protip: if, for whatever reason, you can’t bring anyone, at least hype them up during the sales process. “Our web developer specializes in this type of sites. He’s proven to blah blah blah.” You catch my drift.

“The Onboarding Experience”

Something that we really focus on at Jakt is on our client’s transition as we onboard them into the production system.

Ideally, they’re coming from having a great experience with your sales team. You were able to gain their trust (and their business). Don’t lose it now. Make sure that the onboarding system is up to the same standards.

How that process looks like depends on your business. Your end goal is to welcome them, get them up to speed, gather any information you need, and build a strong relationship.   

Step 2 – Deliver (aka: do the work):

By now, you’ve (successfully) transitioned your newly signed client to the Production system. It’s time to deliver.

But here’s the thing: just doing the work is not enough –that’s how you get stuck IN the business.

Your job as the business owner is to be the Architect. You have to design the processes, implement the right tools, and assign adequate people. Then, your company becomes a machine that delivers a great experience every time –consistently and repeatedly.

Also, the quality of your work matters. A lot. I will talk about four different strategies for not having a leaky bucket in the next step, but everything starts with delivering exceptional value.

Step 3 – Prevent the leaky bucket:

If you want your business to consistently grow, you need to stop having a leaky bucket. This is something that’s really helped me grow Jakt to $4M/year.

Here’s what I mean by that:

It doesn’t matter how many clients you bring in if you can’t keep the old ones. You’re just replacing them –not adding on top of them.

That’s why it’s so important that you increase the LTV (long-term value) of your clients. It’s also much cheaper to sell to current one than having to find new ones. They already trust you.

There are 4 ways that you can do that:

Retain/Extend:

Let’s use our web development agency.

One of the problems that this type of agencies often face is that they don’t bring in any recurrent revenue. They sign a client. They build their website. And the client leaves to never come back.

While it’s never guaranteed, having some clients on retainer will help you deal with uncertainty and better predict your revenue targets.

Think about what you can offer to your clients so that they want to keep you around.

In this case, for example, you could offer a hosting and maintenance plan for a monthly fee.

They get a continuously monitored website, and you get some money coming in each month. Win-win.

Cross-sell:

Cross-selling is offering a different service than what your client initially came to you for. The key is to identify another problem that your client has and that you can solve.

After building the lawyer’s website, what’s the next issue that they’ll run into?

More than likely, they have no one in-house to take care of their web content/SEO. They’ll have to go find another agency for that –so why don’t just offer it yourself?

You are now extracting more money from them and increasing your LTV.

At the same time, cross-selling needs to come from a place of service. You are not just trying to get “any” money out of them –you want to help them.

Final note: make sure you still keep your offerings close to your core. If they ask you to manage your social media, and no one in your team has had an account since MySpace, don’t take it. Just give them a referral and build up your social capital.

Don’t just cross-sell because you can. There’s a lot you could cross-sell, but that doesn’t mean you should.

Upsell:

Upselling is increasing the deal size for the same service that they were looking for.

To not confuse it with cross-selling, think of McDonald: “do you want fries with your burger?” (cross-sell). “Would you like to make your fries large for an extra $0.30? (upsell).

For web development, you could offer to add an email opt-in form for an extra fee. Or install Google Analytics. Anything that adds more value and that doesn’t come with the standard package that your client initially chose.

Sell to another division/brand: :

And, finally, you can sell to another division or brand from the same company.

If you built a website for, let’s say, the North American division, you can now offer to work with the European division. Or if they’re the parent company, with one of the smaller brands that they own.

Step 4 – End engagement:

Inevitably, some client projects will end. That’s to be expected with any client services business.

Even if you do a great job extending via the 4 methods above, at some point, some customers will leave. And that’s ok.

As long as you maintain a full pipeline of new business prospects and don’t have all clients leaving all the time, you’ll be just fine.

The Production System Takeaway:

• The Production System goes from signing a new client to the termination of the contract. It includes your production team, and it focuses on delivering excellent work.
• To grow your business, you can’t have a leaky bucket. That’s when you sign new clients (adding water) but old clients keep on ending their engagement (leaking).
• To fix that, 1) deliver great work, and 2) increase your client’s LTV. There are 4 ways to do it: expand/retain, cross-sell, upsell, and sell to another division or brand.

I will cover the third system –Back-office– of your company next week. I’ll touch on hiring/firing, payroll, legal, accounting, etc. It will be stuffed with value.

Opt-in the form below so I can let you know when it’s up!