When we begin to work with a new client, the first thing we do is review the current state of their business and do an “audit” of their general business health, and how their marketing is doing.

It’s a good time to keep our eyes open for “red flags.”

What’s a red flag? It’s something that looks too good to be true—a program or practice the client is investing in that we know just doesn’t work. It could be a belief, that our client is basing decisions on, which we have learned time and time again may not be valid.

Seeing red flags is based on experience. A plan that looks like it should work, often doesn’t. And therefore, we don’t get the results we want, or at worst, we fail spectacularly!
Here are some examples that start the Red Flags waving in our minds:

Red flag: “I need to spend time with all of our customers.”

We’ve had clients where only two percent of their customers match their ideal customer profile. In another case, 31 percent of a client’s business came from one percent of their customers. In yet another, one third of their customers were worth 300 percent more than the other two thirds. In these examples, 33 percent to 98 percent of executive time was actually being wasted. Let’s face it, all customers are not all created equal, and you must be clear about where to invest your valuable time.

Red flag: “We don’t track our advertising response.”

When we look at actual numbers and return on investment for advertising dollars spent, we often make some interesting observations. For instance: You spent $3,000 to get one new client that’s worth only  $1500. Ninety nine percent of the people you sent flyers to did not respond to them in any way. Your newsletter advertising got no responses or clickthroughs. If you don’t track what happens to your money, you won’t see where you are wasting it.

Red flag:

“Word of mouth is our best business-builder.”

This is one we hear over and over again, and when we look at the situation more carefully we inevitably find the numbers don’t support the claim. For instance, actual referral sources only generated 15 percent of total income, and you can’t accurately predict when the business is going to come in. Referrals can be your best business-builder, but in the current economic climate, you must have a program in place to ensure you get the measurable results you need.

Have you heard any red flags flapping in the wind at your business lately?