Thursday, April 2, 2020

Customer Relationships are Like Fruit: Sweet & Tasty Until They’re Not

The current climate caused by the Covid-19 pandemic carries unique challenges. Experiences gained from the financial meltdown of 2008, the shock of the 911 attacks, the bursting of the dot-com bubble in 2000, and a wide range of lesser-known calamities, can be distilled into valuable insights, perspectives, and context for navigating today’s crisis. As promised to readers of The Hyde Opinion one week ago, I will be posting “knowledge nuggets” gained during the past three decades in which I have worked side-by-side with business owners in difficult situations. 

Advice: Treat Customer Relationships as Perishables

Customer relationships are like fruits and vegetables in a grocery store. They are valuable only if the store has lights, air conditioning, heating, and workers to maintain their appearance. Their value can evaporate very quickly if the business fails to maintain the necessary conditions. It is of paramount importance to guard customers from the financial problems affecting the business. The protective seal around customer relationships is the trust and confidence they place in a supplier. That seal is often less resilient than many owners believe (one reason for not hitting revenue projections). Once that seal of trust and confidence is broken with one or two major customers, the proverbial “rotten apple” has begun to spoil the whole bunch and the damage can be hard to contain.

This is relevant because deterioration of customer relationships reduces the value of the business based on the premise that customer relationships are what drives value beyond the underlying hard assets such as a building and manufacturing equipment.

Once the mental construct takes hold to treat customer relationships as perishables, it makes it easier to accept the need for faster and more decisive action to preserve their value regardless of how unpleasant it may be to do so.

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