How much does your business spend on acquiring new customers?
Without knowing how much every new customer costs, then how do you know if you are making a profit?
Further more, could your business be better off out sourcing your sales?
Calculating your customer acquisition costs is not as hard as it might seem.
Please use the below example as a simple guide to help you calculate the cost.
In the below example I am using a one man business, where by the business owner earns $100,000/year and sells to 100 new customers every year. Note: We are purely focussing on the sales costs here.
How much does it cost to acquire a new customer?
A: Calculate your time costs
Full time salary: $100,000
Percentage of time spent on sales: 40%
Time cost: $40,000
B: Calculate your fixed sales costs:
Advertising: $5,000
Travel & Tolls: $4,000
Phone, postage and other: $1,000
Fixed costs: $10,000
Calculate your Customer Acquisition costs
A: Time costs: $40,000
B: Fixed Costs: $10,000
Total: $50,000
Number of customers won per year: 100
Cost per customer: $500
If you want to take this a step further, lets imagine that every sale he makes is worth $1,000.
Well, if it costs him $500 to win every client through his current efforts, perhaps he needs to re look at his strategy.
As an example, what if he was to outsource all of the time spent selling and promoting his products. If he were to invest $40,000 into outsourcing this area, all of the sales and marketing would be handled, plus he would have 40% extra time to grow his business!
There’s some food for thought!
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