How does customer service affect business valuation and saleability?

I have had two separate conversations this week with two of our business owner clients. What struck me was the similarity in their answers to my question, "why do you succeed?"

They both attributed their success to exceptional customer service.

Now, I've never met a business owner who claims that their business delivers poor customer service, but, the crucial difference is that truly exceptional customer service can be evidenced.

Exceptional service produces measurable beneficial differences between average [less saleable] businesses, and leading [more saleable] businesses.

This is common sense you might rightly argue, but aspiring to exceptional customer service is easy, achieving it is seemingly a lot harder.

In my experience, as a consumer, average or poor customer service is much more common.

In the case of both of our clients, the evidence of exceptional customer service is very strong indeed; not a comprehensive list here, but the evidence includes amongst other things:

• Their KPIs are simple, they measure predominantly what is important to the customer. There is a constant conversation with customers, they have very good account management capabilities.

• Employee retention is very high, so they retain talent and accrued knowledge; I'd describe them consequently as highly intelligent, adaptable, and resilient organisations.

• They also delegate very well by equipping people. There is a strong focus on training and development in both companies and they get out of the way to allow people to get on with the job.

• Client retention levels are incredibly high in both our clients' businesses. In fact, they simply do not lose customers once they're won.

• They are constantly winning new customers from competitors who, because of poor service, are pushing their customers away and towards our clients.

• Both receive very high levels of new business referrals and introductions, neither client spends much on marketing.

• They both achieve significantly higher profit margins than their peers. Their clients are willing to pay more for the reliability, consistency, and certainty that our clients deliver.

One client summed it up really succinctly, "We just make it easy for clients to do business with us and don't give them a reason to look elsewhere."

If you're a business owner and recognise the above characteristics in your own business, you almost certainly have the potential to sell your business for a premium price.