How do You Find Your Acquisition Cost and Profit Per Customer?

In order for your business to grow you need to calculate and understand your Customer Acquisition Cost (CAC). Many small businesses do not realize the importance of CAC. Many believe that if they constantly gain customers then they will succeed, but this is untrue.

 Even if you gain leads or customers, if they are the wrong type then you will have wasted money. You want to gain a large influx of customers but only if they benefit you. This is where CAC comes in. It helps to determine where and how to distribute your marketing dollars.

 Calculating CAC

In order to get started, you need to know how to calculate it.

1.       Track your marketing expenses for everything that helps you bring in leads and customers

2.       For each marketing channel, track the number of customers you acquire in the same period for which you tracked the expense.

3.       Divide your expenses per marketing channel by the number of acquired customers from the same source

Here’s an example. Let’s say you spend $2000 setting up a booth at a convention. After the convention you gain 4 customers. Your CAC for the convention would be $500 ($2000/4).

Make sure you repeat this for ALL your marketing channels.

 Profit

You always want your CAC to be less than your profit. So if you gained $3000 overall, using the previous example, then you are at a good place. You are gaining money because you spent $2000 on a new customer but earned $1000 more than what you spent.

 When you examine the channels you can see which one is raking in the profits and which one isn’t. A lot of this is going to be trial and error but that is required for a business to be successful

 50% of businesses fail in the first four years. Don’t be in that 50%. By remembering to calculate your CAC you are already ahead of a majority of other businesses.

For more information head over to the original article: http://www.futuresimple.com/blog/acquisition-cost-and-profit-per-customer/

Factoring Receivables

An important part of running a business is understanding how to factor receivables. In order for you to be successful, you have to know what to avoid and certain tips.

Avoid  

1.       Long term contracts – you don’t want to get trapped in a long term contract because as a business, you may end up in the wrong business contract. It’s better to keep your options open while still trying to figure out what direction your business is going

2.       Hidden rates – You should be careful, not to get caught up in introductory rates that come with hidden fees. You should never spend more money than necessary or expected. Many low rates have monthly minimums or inactivity rates, so make sure you research and find what works best for you.

3.       Deception – Keep a copy of your contract and any addendums in a secure place so that if an issue or dispute comes up, you have a reference to go back to.

Remember

1.       Keep track of when customer checks are being applied to your invoices, so that you know when to expect payments.

2.       Get a factor that offer 24/7 secure online reporting. Be sure to look at these at least once a week. You need to make sure that everything is in order and makes sense.

3.       Watch your aging receivables carefully because the faster your collections come in and get posted, the lower your invoice factoring fees will be over time

Many businesses are pulled into the deception that comes with factoring receivables. Don’t let yourself be led astray and stick to a set budget and plan. If you have a goal in mind then it will be easier to choose a contract beneficial to you and avoid scams.

This is your business. Don’t let someone ruin it for you.

For complete words of wisdom take a peek at the full article: http://www.mpstarfinancial.com/tips-for-factoring-receivables/