If I was to ask what it costs you to gain each new customer for your business, would you be able to tell me?
How about if I asked you to tell me the lifetime value to you of each new customer? Or, the value of sales you generate through attending networking events versus your website?
You see, Accountants and number lovers aside, very few business owners have a good handle on their business numbers. But if you want to build a successful lifestyle business, you really do need to get to grips with understanding where the profit is… and where you’re just throwing cash away!
Are you falling asleep there? I didn’t say YOU have to focus on managing the numbers yourself… it’s important that someone is though. However, it is vital that YOU are looking at your management accounts regularly so you can make the necessary changes.
You are having management accounts compiled for you aren’t you?
If you regularly make time to review your management accounts, are you monitoring everything you should be? If you’re shaking your head, read on to discover what numbers you need to know in your business… and how understanding these numbers will help you to make crucial decisions that will enable your business to grow.
Cost per customer
Do you know how much it costs you to get a new customer? Knowing this number will enable you to focus your marketing budget in the right places… as well as monitor if you are spending too much, or too little on your marketing activities.
Lifetime value of each client
What is a new client worth to your business over their lifetime of working with you? By understanding this number, you can focus your marketing efforts in the right places. Would you look for a high value lead in the same place as a low value lead? Are you marketing to high revenue clients in places where only low revenue clients exist?
Ideally you want to be spending less to generate high value clients… and not be spending more to gain low value customers.
Income per marketing stream
If you are spending $500 per month on social media advertising, and $300 per month to advertise in a directory, is the income from each stream consistent with the spend? Could you generate bigger revenues/more high value clients by apportioning your marketing budget differently?
Average sales per client
Getting clarity on this number will enable you to carefully monitor your marketing spend to make sure the marketing streams you are investing in are delivering a profit overall.
Comparing this number to the income per stream will show you whether you are investing the bigger marketing budget overall into the streams that attract the highest value clients.
So, today I invite you to set aside the time to take control of your business numbers. If doing the accounts don’t excite you, bring in your Bookeeper or Accountant to help, but don’t let the numbers control you… or let the profits disappear because you haven’t got a firm enough handle on them.
What numbers are you monitoring in your business? How often do you review your management accounts?