When opening a small business, there are certain keys to success that are universal in their very nature. Here are three steps to home business success that you should be taking action on:
1. Know the Cost of a New Customer
Most business owners I talk to have no idea (or very little) the costs to acquire a new customer or client. Such information is critical, however, as when you know how much a new customer costs, you are then able to look for ways to cut those costs thus increasing income without sacrificing quality.
To arrive at this critical client acquisition cost number, determine your marketing costs for the year and then divide by the number of newly gained clients. Here is an example toillustrate what I mean:
Spending $12,000 per year on marketing brings you in 100 new clients. Dividing the $12,000 by 100 gives you a new customer expense of $120. Now that you know this, you are able to more laser target your marketing efforts and determine ways to decrease costs and increase overall profits.
2. Know the Lifetime Value of a New Customer
When discovering new ways to obtain clients as you are opening a small business, look beyond what you will make initially from them and ponder their value to you over the potential lifetime that they can do business with you. This is one of the critical steps to home based business success, and also typical brick and mortar ones. Do you know what that value is? To determine this number, you will need two other numbers. First, the typical amount a client spends with you in a year, and next, how many years they will spend with you.
If you are a chiropractor with a yearly income of $1000 per client and that client typically stays for three years, then you have a lifetime value of $3000 per patient. When you know this number, you are now better in able to make informed decisions when deciding upon ways to market your business. You have now also determined your marketing budget. This is real handy, so determine your own client lifetime value today.
3. Test and measure your results
Getting as many new clients or customers you can for the absolute lowest cost possible should be a primary goal in your business and on your list of steps to home business success, next to having fun and top notch service and value. And, of course, continuing selling to existing customers.
But once you know what it costs for a new customer and the lifetime value to you after opening a small business, you are now able to test various marketing ideas and determine which brings you the biggest bang for the buck (most cost effective). For example, you run a newspaper ad costing $500 each and every time it is ran, you gain 10 new clients. This means each new customer costs $50.
Are you willing to spend $50 to get $500 if all other things remain equal? Remember, though, that this new customer cost example is only for newspaper ads. There are also other avenues such as radio, Internet, fliers, etc.
To test and determine each campaign's effectiveness, track the results by displaying a priority code, Dept number, or phone extension in the ad. Make each marketing endeavor's tracking unique to be able to realistically determine which avenue brings you the best results.
These three keys to opening a small business are simply a baramoter of how you are doing right now. If you are lacking in any of these vital steps to home based business success, create a plan to implement each one in your business today to help profits grow.
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