• Blog

The Virtuous Cycle of a Business

  • By Dallas McLaughlin
  • August 27, 2018

I believe in something called the virtuous cycle of a business.

The objective of any business should be to grow.

That is, grow the number of employees, grow the number of jobs, grow product offerings. Then, grow the number of customers.

Over a long enough period of time, the incremental revenue of retaining existing customers, and the long-term value of serving them better, is greater than the cost to continually acquire new customers.

Reinvesting budget over allocated to new customer acquisition back into the quality of the business by paying employees higher wages, creating more jobs, building a better product and providing more product or service offerings will lead to greater employee well-being, higher productivity and a higher quality of work across the organization.

When you focus first on improving the quality of the business, more paying customers are a natural byproduct, perpetuating the virtuous cycle.

This is the virtuous cycle of a business.

The alternative to creating a virtuous cycle is focusing entirely on new customer acquisition.

This of course means the pursuit of maximized margins by lowering quality standards, paying employees less while maximizing the volume of work they can produce in any given day.

This creates a perpetual cycle of burnt out employees producing underwhelming products for customers at a lower cost who churn at a higher rate requiring even more efforts to quickly onboard more and more new customers on top of new employees to service those new customers.

This is called the vicious cycle. The vicious cycle will slowly but surely lead to a businesses downfall.

Which will you choose?

Dallas McLaughlin

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