Do You Sell to Trade or Invest – Part 2

Person at a Cross Roads...

Investment vs Transaction

What does a sale mean to you?

“When we sold Barefoot, one of the acquirer owners came up and he did this with his arms, and says,

“I don’t know what I’m buying here? I’m hugging thin air. You don’t have a winery, you don’t have any vineyards, you don’t have any tanks, you don’t have any pumps, you don’t have any trucks, you don’t have a warehouse. What am I buying?”

I picked up a list and I said, “This is what you’re buying, Bob, it’s a chart of accounts with the probability of reorders for the next 25 years, that’s what you’re buying.”
– Michael Houlihan and Bonnie Harvey – 30 March 2021 Podcast talking about the sale of their wine company to EJ Gallo in 2005

Barefoot was an acquisition whose only real asset was a loyal customer base that bought repeatedly.

It wasn’t the wine – there was nothing special about it that justified the price (which, at the time, was the highest acquisition in the wine industry).

Barefoot didn’t own grapes, vineyards, trucks or any of the typical assets you would think when you think about owning a winery and selling wine across the country.

Their only asset was their customer base.

And it was an asset because they invested in their customer relationships. They invested in their Customer Lifetime Value (CLV) since day one.

They did so well they made the biggest deal in their industry.

EJ Gallo was happy to pay to buy Barefoot’s customer base. They knew that, with their larger distribution and resources, they could grow this valuable Barefoot customer asset exponentially.

They aren’t unique.

Amazon ultimately grew from selling books to selling almost everything.

Disney Theme Parks has grown and beat the competition consistently – nearly 70 years and counting.

In Greece, I saw tavernas and cafes busy every single day while neighboring ones were mostly empty.

The difference – Exceptional Service that turned customers into repeat and loyal buyers.

And it comes down to what a sale of your product or service means to you.

Is it about maximising the profitability of each sale? Winning every deal and when you sum up all the transactions in a month you are swimming in profits?

Or is every sale as a means to an end? Using every sale as a chance to build trust and strengthen the relationship, so the customer keeps coming back more frequently and spending more. And getting everyone they know to buy from you too?

Deepening the relationship takes more work and it must be consistent. Nothing will alienate a customer more and kill any relationship capital you have built over time than by “ripping them off” to make an extra buck on a sale.

For example, I went to a restaurant and ordered breakfast one day.

This was not my first time there. In fact, I usually had lunch there, so they knew my family by sight.

I ordered a dish that had a poached egg surrounded by a sauce.

It was so good that I wanted to dip my bread in the sauce after I finished the egg.

The dish, however, had only come with a tiny piece of bread, which I had used to mop up the egg.

I asked for more bread for the sauce.

They brought two very small pieces.

“Wow they are tight” I thought…

I finished those quick and left some sauce on the plate that I would have liked to finish, but I didn’t want to ask the waiter again.

When I went to pay the bill, they charged me for the 2 small pieces of bread…. Almost the price of an entire side dish.

I couldn’t believe it.

It wasn’t the money..(it wasn’t a big amount).

It was the thought behind it… the utter lack of class.

The attitude that they’re just in it to make as much money off me as possible.

What I thought then isn’t appropriate to write here.

They had a transaction mindset. They made a whopping single figure profit on those 2 slices of bread.

I never went back.

I ignored their emails with special offers and discounts.

And within 12 months, they were no longer in business.

Giving great service to your customers and investing in their lifetime value is key to success.

If you approach it the right way, you can make a lasting impression on your clients and reap long term rewards.

Approach it the wrong way… and it can kill your business.
————

P.S. My Book Roadblocks You Can’t Ignore: 10 Roadblocks Holding You Back From The Freedom You Deserve From Your Business is now available in paperback and Kindle on Amazon.com and other Amazon stores (not UAE yet). A free copy can be requested through my website by clicking Book.

 

 

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