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What Your Client Turnover is Really Costing You

If you’ve ever had anything to do with the Human Resources department in a company you likely know that they hate Training & Development. Not because it isn’t fun or a great way to knock off an afternoon. It’s because it’s time consuming and presents the largest expense to the company. The higher the expense, the more stressed upper management tend to make Human Resources professionals. Here’s what happens:

Company A has a high turn over rate (lots of employees coming and going). For every outgoing employee a new employee must be found. This means incurring the expenses of marketing the position, the hours of interviewing potential candidates, and the additional hours of making the final decision and receiving confirmation the candidate will accept the position. This all means money loss for Company A since the current employees involved are getting paid by the company for non-production work. The expenses aren’t even finished though. After the hire, you have to train the new employee. Again, hours spent in orientation meetings, procedural testing, and whatever else needs to be done. There is also an expense incurred by the outgoing employee as the HR department now has to prepare all the necessary paperwork and look after any loose ends, such as benefits payouts and such. This can create an enormous cost for Company A. Thousands of dollars spent on non-production, a.k.a. non revenue generating, tasks and, ultimately, upper management will see this as a Human Resources problem so it often creates tension in the workplace. 

Company B doesn’t have a high turnover rate. Their employees tend to stay for long periods of time. Many employees have received retirement gifts from this company. Because of this, overhead always stays within 20% of the total profits and Training & Development has a much smaller budget than that of Company A. Company B also tends to be the top producer in its industry every year due to the expansion it is able to afford. 

You may not think this little story applies much to your circumstances. After all, you don’t have a big HR Department. Maybe you have 50 or less employees. We get that,

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but, this principle still affects you and you business in a huge way. How? Customers. Think about it, what’s the best way to grow your business? To be constantly having to cultivate new customers or to have a high rate of repeat customers that also bring you new customers because they just love you that much?

Have you ever sat down and figured out what it is costing your business to acquire one new customer? The marketing cost, materials cost, meeting costs, transportation cost, and networking costs. If you have an office or a store, what are your expenses to keep it going each month? Rent or mortgage, electricity, heating or cooling, office supplies, and so on. How many customers does it take to make a profit or, better question, how much do you need to spend to acquire one new customer so you can pay your bills and make a profit? The lower you can get your acquisition costs, the more profit you’ll make!

It’s at this point that we feel the need to offer a disclaimer: our point is not to cut back on your marketing budget by using substandard or unprofessional methods and materials. Our point is to maximize what you are spending to get 1110% out of it. In today’s marketplace business owners have to be willing to look for, and implement, creative marketing strategies that have the potential to double every dollar spent. What is that quote….Work Smarter, Not Harder? Well, that’s exactly what your marketing dollars should be doing for you. Don’t start cutting back, get smarter about how, when, and where you are placing your marketing efforts.




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