A key factor in any size business...

Not too long ago I put on a marketing seminar for several people looking to start a business in the county in which I reside.

One of the main questions I asked them was:

"How much do you need to spend on marketing?"

The puzzled looks stared me in the face so I rephrased the question:

"How much do you figure it will cost you in money/time to create one sale through your marketing efforts?"

Again...blank stares.

Unusual?

Not hardly. As one of my 'occupations' I work as a Business Specialist for my part of the state, which covers about 1,300 square miles and 2,000 businesses. I help businesses with marketing issues, operational issues and funding issues. And I will guarantee you the number of businesses out there (both new and established) that even have a rough idea of what it costs them to acquire one new customer is less than 5%. Possibly less than 1%.

From my point of view having been involved in numerous businesses over the last 15 years as an employee, owner or consultant, the cost to acquire one customer is the main determining factor IF and HOW successful (i.e. profitable) a business will be. But most businesses have no idea what it costs them to acquire a customer.

If you own a restaraunt and it's costing you $100 to bring in one new customer and that customer represents $50 in net profits over the course of your relationship then you'll be out of business...soon.

If you have an Internet related business and it takes 4 hours of work to acquire one new customer who represents $20 in net profits over the course of your relationship, is that making you money?

The trouble is if you don't have an idea of what your customer acquisitions costs are you are flying blind. And blind pilots eventually crash.

Again it doesn't matter what kind of business you're in...customer acquistion costs need to be known and understood in order for you to achieve maximum profit.

Do you think McDonalds knows what its customer acquisition costs are? How about Wal-Mart?

The way to make a small business into a large one is to find out what your customer acquisitions costs are in a small, testable and measurable area and if the acquisitions costs make sense, roll the program out into a larger arena.

That's why if size is important to you, you need to pick business opportunities that aren't limited geographically or by some other limiting factor like say the availability of merchandise.

In this forum we tend to talk about other things like motivation, which is much 'sexier' and perhaps more interesting than 'customer acquisition costs' it pales in comparison in overall business success (in my opinion).

What are your customer acquisition costs?

Take care,

Mike Winicki