Existing Customers or New Prospects - Who's More Important?

Neither. That's the answer to the question in the title above.

Or to answer it in another way: both. Either answer is valid because they recognise that existing customers and new prospects are equally valuable to your business.

I used to work for a global software company that sold systems costing hundreds of thousands of pounds. It operated a hungry, fired-up sales team that vigorously hunted for new customers. They pursued big businesses, persuaded them to sign contracts, and then handed the customer into the care of the service and support team.

Service and support were not sales people. They did a great job of making systems work and keeping them running because that was their job, but they didn't sell.

What was odd about this set up was that the software company made its money not from sales of new systems, but from ongoing support fees. It's also a recognised fact that it's easier to market to your existing customers.

So if the business made most of its money from customers who chose to renew their support agreements and they were easier to market new products to, why were the sales team so heavily focused on signing up brand new customers? With the result that existing customers sometimes felt like second-class citizens.

It's too easy for businesses to focus on 'new business' while neglecting existing customers. It's not deliberate, it's just the way it happens. A new customer is more exciting than an old one. But which is more valuable?

So I'll come back to the question in the title of this post. Existing customers or new prospects - who's more important? If the answer is 'both' then the next question is obvious: do you treat them both in the same way?

Do you?

Don't Pay Taxes - Legally

Are quarterly VAT payments causing you a major cash flow problem?

If they are, you may already be aware of, or even using, the HMRC's Business Payment Support Service (BPSS). Established in late 2008 as the recession deepened, this service is intended to help businesses spread their tax payments over time, reducing cash flow pressures.

If you've got this far without needing to use BPSS, well done. But the continued uncertainty of 2010 means you might yet have a need. So I thought you might be interested to hear how it's worked for others.

I took advantage of the scheme almost as soon as it was launched. I was working with two firms with VAT payments due in January 2009 and neither had the cash to pay. I called the BPSS and in both cases they agreed to the VAT payment being deferred into three monthly instalments. They asked very few questions and took very few details. It all felt remarkably informal, particularly given that I was talking to HMRC.

I used the scheme again at the end of the next quarter and once more it was easy to arrange. But this time they wanted some assurance, though only verbal, that they'd get the money.

I conducted an informal survey of the experience of other businesses through UK Business Forums. The feedback is that most businesses have received favourable treatment so far, but it does seem to depend on who answers the phone at HMRC's end.

One accountant reported that a client had two very different experiences on the same day. One VAT office insisted they spend time providing 12 months accounts and cash flow forecasts while the other office allowed a deferral of over £50k of VAT and PAYE with virtually no questions asked.

There are signs that HMRC are tightening up. If you're calling to defer your payment for the third or fourth time you'll probably find it harder to get what you want. Regular users of the service are being challenged about what other steps they can take to improve their cash situation. Some are being told that repeat calls will increase the likelihood of a VAT inspection in the near future.

HMRC originally intended the BPSS to be available for 2009 only. But in his pre-budget report last month the Chancellor announced it would continue for as long as necessary. On the other hand, the UK government needs all the money it can get and I'm sure it would like to reduce the one billion pounds it's lending to UK businesses through BPSS.

One of the UK's top accountancy firms, Wilkins Kennedy, believes the service is being wound down as the government tightens its belt. Director Anthony Cork, quoted on bytestart.co.uk, says businesses will probably need even more support as the economy picks up.

So if you're beginning 2010 with cash flow woes and you make VAT, PAYE or Corporation Tax payments, you should do all you can to exploit the opportunities for deferring these with BPSS.

But be prepared to make a good case - the reason why you need to defer and, more importantly, the reason why you're confident you can pay in the future. You might have to argue for a deferral, but at the end of the day BPSS is there to help UK businesses.

Recession-Beating Tales

This blog is featuring stories from ordinary people who've decided to become their own boss despite, or perhaps because of, the current recession.

The stories so far...

Green fingers grow a hobby into a business:
Helen's a winner at Gardening Scotland

Young mum learns lessons from business failure:
Gemma's fresh start in online retailing

16 year old girl becomes inventor and business woman:
Ruth takes a steady approach to success

New Zealand mum turns typing skills into her own business:
Fiona Wins with Audio Transcription

Bolton couple shelter beneath an online umbrella business:
Brolly success for Chris and Rebecca

A football coach aims to score with iPhone applications:
Craig's developing his own future

Two students ditch a toxic solution and find a better way of cleaning:
Adam and Amber launch a green clean business

Converting employee experience into a business:
Nancy's medical billing operation

Turning a passion for customer service into a going concern:
Brian answers the business call

Solicitor finds a niche role in the media:
Olivia wins a starring role in TV

A mother creates employment and an income for herself:
Trina makes her own success

A keen salesman finds himself in hot water:
David splashes out in Scotland

Marketing Manager turns redundancy into opportunity:
Debs does marketing services

An entrepreneurial tale from New Zealand:
Lenna finds keys to success

21 year old generates £28k from £3.69 in 6 months:
Matthew's story of serial success

Young graphic design talent goes solo:
Gemma's eye-catching new venture

A new business in training:
Ross takes a health and safety risk

Mum turns her hobby into a business:
Becky Spots a Dotty Opportunity

Where there's muck there's brass:
John Cleans Up in South Wales

Turning fashion sense into business sense:
A 2009 Start Up Story

If you'd like your story to be considered for inclusion, get in touch by sending an email. Or contact us through our Twitter account: @biz_oh.

Becky Spots a Dotty Opportunity

Here's another in my new series of articles celebrating businesses founded during the current recession.

This is the story of how a hobby became a business.

Becky Peabody, of Somerset, has always designed and made her own greetings cards. Ten years ago, following the arrival of her first child, Becky created a personal Christmas card combining her artwork with a family photo. She had 100 copies printed locally.

This became a tradition that led to a friend asking Becky to create a Christmas card for a small business. The opportunity for a larger print run, with its economies of scale, led Becky to start selling the card to others. So Dots and Spots was born.

With an initial investment of just £500 Becky has built up a range of unique and distinctively styled cards, pictures and gifts which she sells online and to a number of shops.

Getting into the market meant Becky had to approach a number of small, independent retailers directly and persuade them to take her stock. It was a thrill to have a first repeat order because it meant her creations were selling and soon other retailers were contacting her to buy stock.

Becky does not have a business background; she's worked for about ten years as a teacher and taken time out during her career to have her own family. In 2009 she took the brave decision to leave teaching to concentrate full time on Dots and Spots, which had a turnover in its first year of about £10k.

Leaving work has meant a cut in income for Becky and her husband, who has a full-time job but runs the Dots and Spots website. She's confident that business, and income, will pick up in 2010. Two agents now represent Dots and Spots products and she is hoping to participate in one or two trade shows. Turnover targets for the next year are around £20-30k and these appear realistic based on recent activity.

These are still early days for Dots and Spots. In common with most entrepreneurs Becky is investing a considerable amount of time and money (about £2k to date) in her business. She says that one of the main lessons she's learned is that "the trade element is the main 'earner' for the business and this is the area I really want to grow, but the retail provides a nice residual bit of cash, too!"

Visit their website if you'd like to know more about the Dots and Spots original and unique range of cards, gifts and pictures.

If you set up a business in late 2008 or 2009 and have a story to share drop me a line via email or make contact with @biz_oh via Twitter.