Business Diagnosis Explained

So, you've just finished the 11-minute business diagnosis quiz by Westernston, and you've just received your results. In this article, we will explain to you exactly how and why the quiz generates the results it generates, and what it means for you.

We will post every question from the quiz along with every option you could have chosen. We will also list the scores attached to each option you could have selected. And finally, we will break down why the scores as assigned the way they are.

Without any delay, let's get started...

Section 1: Lead Generation

We start off with the most obvious application of marketing principles with lead generation.

Q1: How many different sources of leads/clients/new business do you have?

Image reference: The Parthenon.

The Parthenon has so many columns. It stands strong because of all these columns. It has weathered fair and wild seasons because of the stability imparted to it by all those legs it has.

Sources of leads in your business are its legs. The more you have, the more stability your business has.

  • Only one that works consistently: 0 points: You're on the verge of not having a new source of leads. While things may be fine right now, at least from a lead generation point of view, there is no guarantee that this will last over extended periods of time. You need more sources of new leads, and you need them ASAP.
  • Two or Three: 10 points. Better. You have some stability and security. You could stand to lose one or two of your current sources of new business, and you'd still survive. Your business is very similar to a financially affluent person who maintains a savings account for the rainy day. Well done. However, you should continue to test for newer sources while the going is good.
  • Four to Six: 20 points. Awesome. Your business has things under control from a lead generation point of view. This is very good. You are not likely to fail on the lead generation front anytime soon.
  • More than Six: 30 points. Perfect. You do not need to think about sources of new business right now. You can focus your energies elsewhere. Any more effort expended into finding new sources of leads may not yeild as much return as perhaps some other weak link your business might have. Look for the bottleneck. The number of lead sources isn't it.
  • I'm not sure: -10 points. You don't know where you're getting your new business from. That doesn't necessarily mean you don't get any new business at all. Just that you can't control your lead generation processes and thusly outcomes. Which means that if new leads generated dropped by 50% tomorrow, you'd have no idea how or why that happened.

Q2: How well do you know the cost of acquiring new leads?

This is just good tracking put into practice. Any serious marketer worth their salt keeps track of how much money they are paying for each of the new leads their systems are generating for them. A good marketer, of course, will track each individual source of leads for the amount of money spent versus the number of leads generated.

  • I have no idea: -10 points: Danger zone again. Your team isn't doing the bare minimum. You should really get someone to do this ASAP. Especially since the bare minimum we recommend is to simple take your ad spend and divide that by the number of leads generated. It shouldn't be so hard. Nor is it time consuming.
  • I have a rough aggregate idea. I derive my cost of lead acquisition by dividing my total marketing spend by number of leads obtained: 10 points: So this is the bare minimum. It's not ideal, of course, but at least you have some visibility. More granularity is still recommended.
  • I know my cost of acquiring a lead from each individual source. I know which sources work best for me, and which don't work at all: 30 points: This is how it should be.

For Westernston's clients, we track the cost of generating leads broken down by not only source, but also date and time, audience demographics and creative used. We ensure our clients have access to usable data that they can make decisions on the basis of.

Of course, data by itself can be dull and meaningless. It's data that you can visualize and derive meaning from that counts. 

And while it may not be possible for a small business to have as much granular control over data (and its implications) as a professional team like Westernston could impart, we still recommend at the very least tracking your CPL (Cost per lead equals advertising spend divided by number of leads generated) and if possible, CPL broken down by the source of leads.

laptop computer on glass-top table

Often, just this much gives you enough insight to make serious decisions that compound results (one way or another) over the months and years.

Q3: Do you track how many of your leads get converted into paying customers or clients?

This question is about the quality of your leads.

So far we have discussed the quantity. Now it's time to discuss the quality.

Leads do not matter at all if they never convert. People are either interested in what you have to sell, or they're not. Your offer either works, or it doesn't.

If you had to generate 500 leads to make one sale, your conversion ratio would be 0.2%. If I were competing with you, and I were paying twice as much per lead as you did, but I was converting 1 out of 50 leads on an average (and therefore enjoying a 10x higher conversion rate than you at 2%) I'd clean out the marketshare and you'd have no idea what hit you.

All of that, of course, starts with tracking. Just like anything and everything else in marketing. Tracking really is the first step.

  • No: 0 points: So again, your business is running blind. Like driving a car with solid steel for windscreen. We really wanted to award -20 points here, but too many small businesses don't track this which led to really poor results overall on the diagnosis, and so we essentially bumped up the scores a little. Just so everything seems nice and peachy. Fun fact: When you have no idea how many of your leads you're converting, you really have no reason to advertise or do anything else in order to generate leads. And no, it's nowhere close to being ideal.
  • We don't track conversion ratios, but I know on an average, we're converting 4% (or 2% or 10%) of our leads into clients: 10 points: Bare minimum, but still head and shoulders above the average small business with less than $5 million in sales. While this is a very simple and rudimentary tracker that only speaks to the averages (article coming soon: Why averages are meaningless), it is still something.
  • We track conversion ratios for individual lead sources. We know which lead sources yeild leads that convert better, and which lead sources send us bad leads. Consequently, we know cost of client/customer acquisition from each individual lead source: 30 points: Things are how they should be. You know which of your lead sources are truly working and which aren't.

And the reason why you really need at least a certain degree of granularity in your data is explained by this (hypothetical but realistic) scenario...

You can't spend $5 for a lead if less than 1% are converting (assuming your gross profit {Revenue less COGS} from your first {say} 3 months' transactions is $500) while you can spend $10 for lead if 4% are converting (delivering a CPA {Cost Per Acquisition} of $250 versus more than $500 from the former lead source) into paying customers.

Section 2: Communications

As with everything that has to do with human beings, communication is clearly the most important aspect.

“Communication – the human connection – is the key to personal and career success.”

Paul J. Meyer

Q4: How do you segment your lists of clients?

  • We do not have a list of clients: -20 points: If there is a list of seven cardinal sins with respect to business, this would be the very first. It would also be the deadliest. Your list of existing clients is the goldmine that can keep on giving, assuming you never breach their trust. Generating revenue, profits and other tangible and intangible goodies is about as easy as it gets when you tap into this list's enormous power. If you are not maintaining this list, you are not just leaving money on the table. You're essentially helping your competitors destroy your business. Just stop whatever it is you're doing right now, and focus on this. And you'll be thanking us within weeks.
  • We do not segment our list of clients at all: -5 points: First things first... at least you have a list of clients. You're not segmenting them, which basically means you do not have data points on your people. You don't know their ages, their addresses, their income level, their interests, their anniversaries and birthdays, their engagement status vis-à-vis your communiqué, their purchase behaviors and so on. The bad news is that you're missing out. The good news is that this is easy to rectify. All you need is a database management system (we recommend ActiveCampaign for small businesses) that can track all these data points and then generate custom lists based upon them.
  • We segment clients on the basis of their demography or geography: 0 points: This is the next level. You're getting started with collecting data points. You now actively maintain a database containing as many data points about your customers as possible. While this is far from a detailed set of segmentation practices, it is a great beginning. Now, start tracking revenues and sales, and you'll have a great start.
  • We segment our clients on the basis of revenue they've generated for us: 5 points: This is the bare minimum we recommend you do. Simply because we are huge proponents of disproportionation. Essentially, customers and clients who spend more money with you are more likely to spend even more money with you. It's as simple as that. In fact, if your business is large enough, you can observe patterns such as half of your net profits perhaps come directly by selling to less than 1% of your most prolific clients. Segmenting customers by revenue is the least you can do in order to maximize the returns you generate on communicating with your customers.
  • We segment on the basis of the source of their acquisition: 15 points: This is serious stuff now. You are getting into the territory of weapons-grade marketing. You track data points, as well as source of leads. You now know how many of your high-revenue clients are coming from Facebook Ads, for instance.
  • We have systems to collect as many data points about our clients as we need. So I can filter clients who've spent over $1000 over the last three months who live within a 3 mile radius of any of our stores, who came to us from newspaper ads, if I wanted to, for instance: 30 points: This is what we here at Westernston strive to develop for our clients. Complete granularity. Beautifully actionable data. Data that drives decision-making.

The end game here is to progress from segmented lists to trigger-based (automated) marketing systems that target (and get triggered for) one person at a time.

So for instance if I visit a certain page on your website four times in a month, an email sequence is triggered just for me. Or if it's my birthday, I receive a special gift along with maybe a 50% off coupon code valid for one week around my birthday.

None of it is possible unless you have the right systems. And of course, you must track, collect and work with as many data points as you can.

Q5: How consistent is your follow up with your leads?

Let us talk about the frequency and consistency of your followup with your clients. Half the battle is won with sheer consistency here. Just consistency alone makes you stand apart from the vast majority of your competitors who do not have systems for automating follow-up.

  • Unfortunately, that's something we're working on, but as of now, we don't always follow up with all our leads: -10 points: You are leaving money on the table. If you are comparing two or more companies to buy a product or service from, and only one of them reaches out to you or responds to you or follows up with you... you are automatically more likely to buy from them. Even if another company had a better option for you.
  • We try to get back to as many people as we can, but we always miss some: 0 points: Again, leaving money on the table. Far from ideal. See the previous point.
  • We call every one within x business hours… or email them within 1 or 2 business days: 10 points: Excellent. They say well-begun is half-done. Consistent follow-up is crucial for every business. You simply cannot afford to be outdone by a competitor who has better follow-up. That's just inexcusable, and fortunately, you don't have that problem.
  • We have dedicated automated follow up systems for most standard lead profiles… but we do not have systems for personally following up: 15 points: You have successfully systemized part of the follow-up systems. Keep at it, and soon you'll have systemized it entirely. It's always a process, and it does take time and energy. But as you're well aware, it's well worth it.
  • We have systems for automatic follow up. We also have systems for dedicated personal follow up within x number of hours, or x number of business days - and there is not a lot of scope for improvement there: 30 points: Perfect. You have weapons-grade follow-up systems. This should be the endgoal for every small business out there.

Q6: How frequently do you follow up with your existing or past clients and customers?

  • We don't follow up with clients at all: -25: Remember when I said not keeping a list of clients is cardinal sin #1? Well, this one is cardinal sin #2. If you don't follow-up with your existing clients even once a month, you're essentially giving away a large portion of your profits, and equity. I'd go on to say that for many of our clients' businesses, almost all their profit comes from following-up with existing clients. I'm talking 90% or higher. Which means over 95% of their business' net worth (and consequently their own equity in the business) comes from following up with existing clients and customers.
  • Roughly once a month: 0: Better than nothing, but not great.
  • Roughly every fifteen days: 5: Way better than nothing. Still not great, though. Still leaving found money behind for no good reason.
  • Roughly every week: 10: This is the bare minimum Westernston recommends. We have seen businesses with nearly nothing else in smooth order that just focus on following up once a week consistently... and we have witnessed them having amazing successes.
  • More frequently than once a week: 20: Excellent. Keep up the good work.
  • More than three times a week through automated systems, and at least once every month personally over phone or face-to-face meeting: 30: Awesome. In the parlance of gamers, you've hit what is known as "God-mode."

The Core Philosophy of Follow-Up

The thing about follow-up is that you can't just write an email if you have nothing to talk about. In order to have follow-up, you need to (read: you are forced to) have something to say. Which is what forces you to innovate, create, or come up with something new and noteworthy.

Which, in a cyclical manner leads to more (and better) follow-up, which then imparts to you ideas for innovation and creativity.

Section 3: Business Stability

Q7: Does your website consistently bring in new leads and clients?

  • We don't have a website for our business: -20 points: Either you really know what you're doing, or you are doing what we consider inexcusable when you can hire someone off Fiverr to build your website in a day for less than $100.
  • Our website doesn't bring in any new business or leads other than an occasional contact form fill-out: -10 points: This is the vast majority of all websites on the internet. Especially those of small businesses. It's a poor condition to be in.
  • Our website does get decent amount of traffic, but does not bring in leads consistently: 0 points: Your website ought to be more than a brochure. if you are receiving traffic, but not leads, then something is wrong. You are of course ahead of the curve, because most websites wouldn't be receiving much traffic (or any for that matter) at all. Still, you have a leak somewhere. Maybe you need to create a dedicated landing page where your visitors could interact and sign up. Maybe you need to create an interactive gadget, gizmo or quiz so that people may receive value from signing up. But something must be done.
  • Our website gets leads consistently, but we don't necessarily convert those leads into clients consistently or regularly: 10 points: So you're getting leads, but the quality is debatable. This could be because of one or more of several possible reasons. Maybe your traffic source isn't so great. Maybe there is a disconnect between what your audience expects when they sign up and what they experience. Maybe you have poor follow-up systems. But again, you have a leak that drains conversions, and you need to plug this leak as soon as you can identify it.
  • Our website gets leads consistently… and the prospects are already warmed up through automated marketing systems. So we are able to convert a profitable percentage of these leads into paying customers and clients - who love doing business with us: 30 points: There isn't much more to do here. You have already optimized this aspect of your business, and your time would be best invested working on something else.

Q8: Does your business have a recurring income component - like a membership or continuity?

  • Our business does not, and can not have a recurring income component. No one in our industry has ever done it. And it can't be done because it just won't succeed: -10 points: Not only are you missing out on a beautiful aspect of business systemization... one that steadies revenue streams... but also you are staunchly convinced that it is not even possible for your business.
  • Our business does not have it: 0 points: At least you don't believe that a recurring income stream is impossible for your business, so that mental battle is already won. Any implementation is only possible when you believe it is possible.
  • Our business has a recurring income component - but we don't get new members consistently… and it's not all that we'd hoped: 10 points: Great that you have it. But you do need to figure out why you're not getting new members consistently. Recurring income revenue streams are about two main issues: New member enrollment and member attrition rate. As with everything in marketing, the only real answers come from data. You have already set yourself on a path that can lead to great consistency within your business. Now you need to optimize your systems on both ends: Getting new members and delivering value (both perceived and intrinsic) to your existing clients to lower the attrition rate.
  • Yes, we have a recurring component - and it's working well: 20 points: Great job. Can you think of another recurring income stream? Say at 4x the price point? Surely the number of members would be much smaller, but the profit margins could be much larger. Alternatively, if the value delivery mechanism at 4x the price would be too cumbersome or costly, you could consider a second recurring income stream at 0.25x the price point. The delivery should be nearly perfectly automated at that point, and you'd primarily only be focusing on acquisition and attrition-management.
  • Yes, we have two or more recurring components - and they're all working well: 30 points: Perfect. Nothing more needs to be done here. Your business might as well be a beacon for the rest of your industry as well as several others.

Every business owner ever: "But my business is different!"

Dan Kennedy, copywriting legend and marketing genius

No, dear fellow entrepreneur, your business isn't that different. We assure you that you can have not one but multiple recurring income components if you decided upon it.

Q9: What kind of client loyalty do you enjoy?

Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.

Steve Jobs, Founder of Apple

Like him or hate him, Steve Jobs knew marketing and he knew customer loyalty like no one else. It is a testament to the loyalty Jobs inspired in customers of Apple computers worldwide that Apple has been hailed as the most valuable company on the planet... ever.

If that doesn't speak to the value of customer loyalty, we don't know what else could.

  • Our customers aren't loyal. They buy from us because they have to… or we happen to be more convenient… but they don't care about us at all. They'd just as well buy from a competitor if that was more convenient: -15 points: Essentially you don't have clients or customers. They are not "your" clients or customers, per se. They just bought from you. A transaction, not a relationship.
  • Our customers buy from us because we offer the best prices and best deals: 0 points: Again, those customers aren't loyal to you. They're loyal to whoever offers the lowest price. And since economies of scale work the way they do, sooner or later someone else will come along with deeper pockets and the ability to offer lower prices than you. Hint: Apple Computers isn't exactly known for the cheapest computers ever.
  • We have great loyalty on account of exceptional customer service: 15 points: Now we are getting somewhere. While almost all your competitors are thinking "low-prices" and "convenience", you're transitioning to brand-building. Customer-service is an often overlooked aspect of branding. And while this is necessary to build customer-loyalty, we fear that just by itself, it may not be sufficient.
  • We have great loyalty from our clients on account of either the uniqueness of our products… or our brand value. While our clients sway towards our competitors from time to time, they keep coming back to us: 20 points: Very powerful. You're getting serious with your brand-equity now.
  • We have total loyalty from our clients. Not only are our products unique, but our branding and positioning is well defined. Our clients know that none of our competitors can offer what we offer. And they don't mind paying a premium price for our products. Our brand is also well known for over-the-top customer satisfaction experiences: 35 points: Excellent. And that's all we have to say about that.

Q10: How well-systemized are your marketing and operations?

  • I am stuck. The business will come crashing down the minute I step down. Nothing works without my involvement. I feel like a slave to a job - only without the holidays, paid vacations or off days: -15 points: We are sorry to hear that. You may need some help. Business shouldn't be this hard. Any job would be better at this point. No amount of money is enough to justify that kind of pressure and anguish. We recommend checking out consulting programs here: https://www.westernston.com/consulting/
  • We haven't really systemized our business at all. I have to take care of everything if I want it done right. I am somewhat stuck, but I love doing it and working hard, so it's great for now: -5 points: Again, not an enviable position to be in. Sooner or later you will get tired. We suggest focusing your time, money, attention and resources towards systemizing at least some of the easily-systemized aspects of your business now that you're still enjoying the process.
  • We have systemized very few aspects of our business. I find myself constantly putting out fires, and dealing with last minute challenges. I spend a lot more of my time just running my business instead of growing it… though every now and then I still manage to work on improvements: 5 points: Slow and steady does win the race. You are on the right track, but maybe a little help wouldn't hurt.
  • We have systemized some aspects of our business that are easy to systemize or automate. But there are operations, or marketing aspects that constantly need my attention. I also find myself putting out fires from time to time. I wouldn't feel very comfortable leaving the business and letting it run on its own for months at a time... though I do manage to take relaxing vacations and breaks from time to time: 20 points: Excellent. You are way ahead of the curve by now. Keep at it and it's only a matter of time before your business starts running on its own.
  • We have totally systemized marketing as well as operations. The business runs on its own. And it grows on its own. There are systems for every position in the company - from CEO all the way to interns. We're so well systemized that our new hires are automatically trained through a series of videos, templates, diagrams, and training provided by their managers... and all of it works on its own synergistically. As a business leader, I spend a vast majority of my time improving my business, its systems or marketing... and very little time acutally running it. In fact, I can give you a document right now that will show you everything you need to know about every aspect of running, managing and growing my business: 50 points: If you're not an industry leader yet, it might only be a matter of time.

Q11: How has your business' performance (EBITDA or Cashflow) improved on a year to year basis over the last three to five years?

We have found that cashflow is the best indicator of the effectiveness of a business' strategy. If your cashflow is growing, chances are you're doing better today than you were doing a year ago.

  • We haven't made a profit. We've been in the red:- 40 points: While Westernston does not work with pre-revenue companies, you do need help. Maybe you need a solid pivot around the business model, offered products and/or services, customer segments, marketing messages or media, or something else. Maybe you need to shelve this project and work on something else. But you can't sustain this indefinitely. Nothing happens without profits, and profits do solve a lot of problems.
  • The cashflow has declined over the last three to five years overall: -15 points: Declining cashflow is always indicative of underlying problems. The rest of this diagnostic quiz should have given you some ideas about where you can start looking in order to identify your bottlenecks.
  • The cashflow has remained roughly the same. There have been temporary rises and falls, but it's largely been a sideways performance: -5 points: You are not beating inflation. While on paper your cashflow remains steady, actually it is declining when you take inflation into account.
  • Cashflow has grown, but very slowly. Less than 7% on a year to year basis: 0 points: You are basically beating inflation, and that's that. In an age of fiat currencies, that isn't much to brag about.
  • Cashflow has grown on an average between 7% and 15% a year: 10 points: You are doing about as well as any other decently-performing competitor. Keep in mind that inflation is part of the reason why your business' cashflow is growing, so your growth, while it looks amazing on paper, isn't quite something to write home about just yet.
  • Cashflow has grown between 15% and 30% a year: 15 points: You are doing better than the markets. you are handily beating inflation, and are almost guaranteed to be gaining marketshare at an admirable rate.
  • It's been a breakout performance. Cashflow has grown over 30% a year on a year to year basis: 40 points: Excellent. The feat you have accomplished isn't easy. Not easy at all. Keep it up. This is especially impressive if your cashflow is over $1 million a year.

Final Tally & Results

When you add up all your points, divide them by 3.65 to obtain a percentage score (highest score is 365). Here's how we are awarding grades...

Less than -25: Grade F (Need to rethink everything)

Based on your submissions, your business is in serious trouble. Inconsistency is the norm, and unpredictability is the name of the game for your business.

You likely don't know where or when your next batch of clients will come from. You don't control that. Chances are you don't have a clear message or USP for your market either... and aren't renowned for any particular reason.

You need to come up with a plan... A strategic plan that will help clarify your message, your offers, and your media of communication with your market. Westernston might help you with that. Talk to us to discuss your specific situation.

Chances are you'll end up in a different business altogether as a result of this call.

Between 0 and -25: Grade D (Needs A Serious Overhaul)

Your business may be at risk. It may not survive the next decade even if it survives the next couple of years. It isn't likely to survive any innovative disruptions brought about into your industry by powerful existing competitors or new startups. The landscape is likely to be unpredictable - making it worrisome for you. You seriously need to start thinking about business systems that enable automation as well as growth.

Westernston's mission is to help businesses like yours double your marketshare, and systemize your operations within a set number of months. Talk to us to know more.

Between 0 and 30: Grade C (Doing Well. Can Do Better.)

You're doing well. Your business isn't likely to crash anytime soon, of course... but sudden events - like innovative competitors can make things very hard for you. There is also a quite a lot of scope for improvement. You are likely not getting as much new business as you'd like. Nor are you fully monetizing the leads you're getting. Your business has systems, but you need to formalize those systems... and document them. So that standardization may ensue.

Westernston's mission is to help businesses like yours double your marketshare, and systemize your operations within a set number of months. Talk to us to know more.

31 to 75 percent: Grade B (Doing Great. Poised For Growth. Small Fixes Needed)

You're almost there. Your business is getting close to ideal. Profits are likely to continue to increase. However, there are holes that you can plug... Money leaks that you can fix. It's also likely that your operations aren't as systemized as you'd like. Westernston would be happy to work with you to help you fix those money leaks... and optimize your business systems.

Over 75 percent: Grade A (Couldn't Have Done Any Better)

Westernston would like to talk to you about doing business together. We would possibly arrange a joint venture, a strategic alliance, or at the very least, interview you. Click here to get started.

Thank You

Thank you for taking this diagnostic quiz. We look forward to communicating with you.

Please leave a comment on how your business did and how you felt about it in the comments below...

-Team Westernston


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Article written by Lakshay Behl
Lakshay Behl is the world's leading business systems architect. He engineers and deploys business systems that automatically operate, manage and grow companies. While he typically works with established companies in certain sectors, his strategies are universally applicable.

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