The success of every business is based upon relationships. When I started my commercial real estate company more than forty-five years ago it took me a month to raise my first $5,000 of capital. Today I raise $1,000,000 with one email. Why? Strong relationships, which I have built by providing continuing after sales service.
The importance of after sales service is simple, but often ignored: It takes far more time and energy to gain a new customer than to sell your product repeatedly to those you already have. It is therefore mandatory in my book to provide excellent service to my customers, especially after I’ve made the sale, so they will continue to do business with me in the future.
For example, over the past four decades, I have built a strong base of investors in the commercial real estate that I buy and manage. And while I usually earn a profit when a property is bought, and often when a property is sold, I never “churn” my portfolio. Why? Because the greatest return for my investors usually comes with a long-term hold, just as the greatest return from a relationship is usually realized over time. Selling a property after a few years might benefit me, but not if it is at the expense of my clients. Transaction costs, which might add to my bottom line, can gobble up their gain. When I hold and manage a property for ten or twenty years I provide greater after sales service and accumulate invaluable investor loyalty.
Similarly, I invest in managing the day-to-day operations of our investments, even though I don’t immediately benefit from doing this. I consistently lose money on property management because I employ more people than my competitors. But this after sales service improves my investor relationships and ultimately generates future sales.
That said, it’s important not to confuse after sales service with excess before sales service. I made this mistake early in my career. When I was practicing law and just beginning to buy real estate I met a woman who said she was interested in investing with me. I carefully explained to her the ins and outs of investment, and over several years we discussed quite a few specific properties. In turn, she frequently asked me for unrelated legal advice, which I was happy to provide at no charge, hoping for her investment. After almost three years I stopped giving her free legal advice because she had never invested.
I read an article in the Wall Street Journal that compared the American style of business to the Asian model. Americans were described as hunters, with the goal of making as much profit as possible from a single shot. The Asian model was more like farming: cultivating the fields of a business relationship, from which future transactions and profits would flow.
Today I believe that the world’s most successful companies provide excellent after sales service. Why? Because we live in a service economy, with a great deal of competition, and it’s more difficult than ever to acquire and retain new customers. More than once I have walked out of a restaurant, never to return, because the service was either slow, rude, or both. I remember that, after a service problem with another brand, my mother always bought a Kenmore washer and dryer because of their reputation for reliability and the availability of prompt service. Kenmore must have similarly impressed my wife, because we have a Kenmore washer and dryer in our home today.
It can take a great deal of time and money to gain one new customer. I suggest that you enjoy, appreciate, and retain those you already have.
Alan
One of my “Chiseled in Granite” business principals is: “Avoid Financial Disaster.”
Almost sixty years later I purchased a beautiful property in Scottsdale, Arizona, with almost one-half mile of frontage on Scottsdale Boulevard. Scottsdale. That’s like Beverly Hills, California, or Park Avenue in Manhattan. How could I go wrong? Rents were below market.
Bosses are inherently intimidating, even though most of them aren’t actually big, or bad. Still, they are “the boss” and they have a great deal of control over your life, which can make them scary.
My philosophy is that we’re all in this together. As a boss, it’s my job to encourage my employees, to pay them fairly, and to steer clear of disasters. It’s also my job to appreciate their candor, their courage, and their concern.