Business Growth, Customers, Marketing, Planning, Profitability, Sales

Is it getting harder?


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According to an independent survey in May 2013, 59% of small business owners said it is harder to run a business today than it was 5 years ago.

Half of those said it was tough keeping pace with technology.

40% of them were concerned about an increase in competition.

Of those that responded, their top 3 concerns were:

  1. Getting new customers
  2. Having enough time
  3. Keeping existing customers.

Research has shown that that costs associated with acquiring new customers are between 5 and 12 times the cost of re-engaging an existing customer to buy from you again – yet businesses are typically focused on getting new customers, rather than their existing ones. All that’s needed are two simple figures to begin to see things differently.  They are the average cost of customer acquisition, and the average lifetime value of a client.

The average cost of customer acquisition is simply the total money spent on marketing, advertising, time, events, materials etc. in the acquisition of customers, divided by the total number of new customers generated as a result of the activity.  For example, spend £500 on an advert which generates 5 people who make a purchase, and the average cost of customer acquisition is £100.

The average lifetime value of a client is simply the average total value any one client is likely to spend with you. To calculate, simply add up the value of all past clients purchases, and average over the number of clients. This can be more complicated to calculate depending on your business, but if you use a simple calculation and ensure you always use the same method, the results will be effective enough for you.

Armed with this data, you can shift marketing spend to keeping your current customers engaged, reducing the average cost of acquisition, whilst at the same time increasing the lifetime value – both of which will help improve the overall profitability.

Running a business can be compared to running laps for fitness. Yes it might be tough some days, but so long as you keep up the training, you will get better. The key is to keep track of your progress. There would be absolutely no point in running laps if you didn’t measure your time intervals.

Business should be fun, easy and very rewarding. Yet 59% say it is harder today than 5 years ago.  By constantly measuring your laps, you will see improvement over time – what was once hard will get easier – and that will help give you the things you want from your business.

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