Good Morning!

1. Feature: Retention First: Build the System That Keeps Good Customers (3 min)

2. From the Archive:

   • The Silent Threat Growing Inside Small Businesses

   • Protecting Your Intellectual Property 101

3. Dear TCoL: One of My Long-Time Customers Is Suddenly Shopping Around

-TCoL

Missed our last feature article? The Late Payer Problem: Fix the System, Not the Client

It is far easier and cheaper to grow an existing relationship than to win a new one.

Bain & Company found that increasing customer retention by just 5% can raise profits 25% to 95%. McKinsey’s studies show that companies with disciplined retention systems grow two to three times faster than those that rely only on new sales.

Retention is not luck, it is a system. Let’s begin to structure one for you without having to pay Bain or McKinsey six-figures.

Step 1: Make Retention a Core Process

Customer loyalty is built on structure, not personality.

Bain’s Net Promoter System uses one simple question: How likely are you to recommend us to a friend or colleague? The answer shows who is loyal and who is drifting away.

Harvard Business Review’s Customer Effort Score found that loyalty improves most when customers find you easy to deal with. Ease beats flash. When you remove friction, you earn repeat business.

The goal is not data. It’s a rhythm of measuring, adjusting, and acting every week.

Step 2: Remove Friction Before It Grows

Customers rarely leave over one mistake. They leave after small frustrations stack up.

Identify the basic problems like:

• Slow responses to questions.

• Unclear pricing or invoices.

• Confusing project updates.

• Inconsistent follow-through.

Pick one friction point for your business every month and methodically eliminate it.

When you do that consistently, you’ll have a better customer experience than 90% of your competitors.

Step 3: Start Every Relationship with Clear Terms

Most trust and payment problems start before the work does. The fix is clarity.

In your sales agreement, make everything clear. Clauses are written in plain English so that both parties understand the deal without legal translation. This kind of clear, unambiguous language helps customers approve contracts faster and shortens the overall sales cycle. It removes the back-and-forth that kills momentum and slows revenue.

In your service agreement or work order, include language like:

“Invoices are due upon receipt unless otherwise agreed. Work may pause on accounts more than 15 days past due.”

That one paragraph prevents confusion later. It also protects your cash flow.

For a deeper dive into clarifying your billing practices, read our recent article: The Late Payer Problem: Fix the System, Not the Client.

Step 4: Recognize and Reward Loyalty

A loyal customer is an appreciating asset. Treat them that way.

You can:

• Offer preferred scheduling or early access to new products.

• Send a brief personal thank-you when they reach milestones.

• Keep pricing steady for customers who stick with you through cycles.

Loyalty grows when customers feel respected. Recognition costs little but signals that you notice and appreciate the relationship.

Step 5: Segment and Protect Your Base

Every customer deserves respect, but not every customer deserves the same level of attention.

Divide your book of business into three groups:

• Growth customers: expanding their spend with you. Deepen these relationships.

• Stable customers: steady but flat. Keep communication clear and friction low.

• At-risk customers: shrinking orders or slowing responses. Call or visit them in person, now.

For at-risk customers, begin a simple “save” conversation:

“We value your business and noticed activity has slowed. What can we adjust to serve you better?”

Many times the fix is operational, not financial. A quick call can save months of frustration and worry. Find out now.

Step 6: Price for Trust

Charlie Munger often pointed to Costco as the world’s cleanest loyalty engine. He said its success came from “an extreme degree of consumer trust.” Costco never runs fake discounts or plays pricing games. Customers know they’re getting a fair price every time.

That consistency compounds. Customers stop shopping competitors because they believe in the fairness of the deal.

Small businesses can apply the same principle:

• Keep pricing transparent and predictable.

• Honor existing rates for loyal customers when possible.

• Communicate any price change well in advance.

When your customers stop worrying about whether they’re being taken advantage of, they start planning their next project with you.

How many times have you been in Costco and wondered if their price on an item was the lowest available? Not often, because they have a system of trust that they have built with you for years.

Step 7: Measure What Matters

Numbers make loyalty visible. Track only a few:

• Customer retention rate: how many customers return within 6 or 12 months.

• Average days to payment: shorter means healthier cash flow.

• At-risk customers identified and saved.

• Lifetime value per customer: the total revenue each relationship produces.

Review these weekly, not quarterly. Buffett once said Berkshire’s strength came from “delighting customers, eliminating unnecessary costs, and improving products and services every day.” Daily discipline builds moats faster than marketing campaigns.

Step 8: Build Your 90-Day Retention System

If you want to see results fast, run this simple plan:

Weeks 1–2: Count your current and returning customers. Set a baseline.
Weeks 3–6: Remove one friction point each week.
Weeks 7–10: Create customer groups (growth, stable, at-risk). Make the calls that save accounts.
Weeks 11–12: Add one loyalty benefit and one process improvement.

By the end of 90 days you’ll have a cleaner customer list, faster cash flow, and a repeatable system.

The Munger Mindset

Munger’s rule still applies: “Take a simple idea and take it seriously.”

Retention is that simple idea.

It’s not marketing. It’s not luck. It’s the daily practice of clarity, fairness, and follow-through.

When you fix friction, set transparent terms, price with integrity, and track what matters, you don’t just keep customers, you multiply them.

Loyalty compounds faster than advertising.

And unlike advertising, you own it.

Sponsor Spotlight

TaxElm: Unlimited access to expert tax strategists and a complete roadmap—from design to implementation—to help you legally pay the least in taxes. Explore our process here or book a discovery call with Matt Grimmer from our team.

Dear TCoL: One of My Long-Time Customers Is Suddenly Shopping Around

Question: A customer I’ve worked with for three years just told me they’re getting other quotes. We’ve delivered on time and at fair prices. I don’t want to sound desperate, but I also don’t want to lose them. What’s the right thing to do?

Answer:

When a loyal client starts price-shopping, the worst thing you can do is panic. The second worst thing is to ignore it. The best first step is curiosity.

Ask yourself first: What changed for them? Customers rarely shop because of one high invoice. They shop because something small has eroded, like communication, clarity, or perceived value. Your job is to find it fast and fix it before they drift away.

Start with a short, direct note:

“I heard you’re looking at other options. We value the work we’ve done together and want to make sure we’re still the right fit. Can we talk this week?”

Then call or go see them in person. Not text, not email. Calls and personal visits signal importance. Listen for what’s underneath their words. You may hear:

• They’re under new budget pressure.

• They don’t fully understand your value compared to others.

• They’re testing the market out of habit, not dissatisfaction.

Once you know the reason, you can choose your response:

If it’s price pressure, show value before you defend price. Summarize what they’ve gained: response times, reliability, saved labor, outcomes. End with:

“If we can lock in predictability for both of us, I’m happy to review scope to keep this efficient.”

That line keeps you flexible without signaling discount.

If it’s service drift, acknowledge it.

“You’re right, we haven’t checked in enough. Let’s schedule quarterly reviews so you always know what’s next.”

Simple structure beats apology.

If it’s just curiosity, make it easy for them to stay.

“You should know what’s out there. I’m confident we’ll remain the best value once you compare total service.”

Confidence builds trust more than defense ever does.

After the call, tighten your system. Add this client to your “watch list.” Follow up every 90 days with a brief value recap: what you delivered, what improved, and what’s next. Customers forget value unless you remind them.

For example, one of the smartest consultants that we know doesn’t list “services” at the top of the column in his itemized invoices. Years ago, he changed the word “services” to “accomplishments” in his billing software. Even the smallest details like that can set you apart and help emphasize the value that you deliver to your customers.

Warren Buffett once said that delighting customers and removing friction is how you build strength. He was right. Most clients who shop aren’t running from you, they’re checking if you still care.

Reach out, listen, clarify, and strengthen the system. Loyalty isn’t lost in one quote, it’s only lost when you stop earning it.

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!