Carl Gerhardt: The Deadly Law of Attrition

Have you heard of the Deadly Law of Attrition? If not, I may shock you with this statement: You’re going to lose your best customer. It’s not a matter of if; it’s a matter of when. My first boss told me this when I was a young, successful salesman. He was eventually promoted, and I got his job as a sales manager. He then said, “You are going to lose your best salesman.”

He was educating me about what he termed the Deadly Law of Attrition. He was successful both as a sales manager and eventually at running the entire company who employed us. He succeeded because he realized attrition catches up to every business unless you understand how to manage it. Here’s what to do:

You must first understand its dynamics. Sure, you might go years without losing a key customer or valuable employee. However, the odds aren’t in your favor. Marketing experts tell you the best marketing plan is to do all in your power not to lose customers. Because if you lose them you have to spend big to find new ones.

The best way of defeating the deadly law is to always be recruiting. It’s just common sense when we’re talking about customers. We should always be selling and marketing because we want to grow. We should also be selling to fill the normal loss that occurs when customers close, move, or, God forbid, go to a competitor.

However, we too often fail to recognize the threat to our key employees. Lose a key salesperson, production person, or customer service rep clients know and trust, and panic sets in. If you’re fortunate to be in a company large enough, consider keeping a “bench” for your key positions at all times. The sales manager I mentioned at the beginning had a team of 15. At any given time, he had at least two people in training. He was prepared when someone either left or was under performing. He used that to leverage the Deadly Law of Attrition to his advantage. We knew by failing to make quota for a few months running, we were most likely on the “replacement list” and he had someone waiting in the wings.

In our small business firms, we typically don’t have the luxury of having a “bench” in training to replace the loss of a key employee. But what we can do is always be recruiting. We should be on the lookout for potential employees for every position in the company. The best people to hire are those not looking for a job. How nice it would be to have a file with names and resumes of great candidates who are working at other companies — even for competitors — who we would want to hire.

Make managing the Deadly Law of Attrition a part of your business plan. It’s just business sense and sensibility.

Carl Gerhardt is a 30-year veteran of entrepreneurship and is retired Chairman of Alliance Franchise Brands. He is currently a consultant with FranNet a company that matches individuals wanting to own their own business with franchise opportunities. Reach him at cgerhardt@frannet.com. Carl is also a volunteer with SCORE offering free counseling for small business entrepreneurs, www.score-reno.org.