In business EVERY customer comes at a cost.

It costs money to advertise. Money to nurture the relationship. Money to get them over the line from prospect to client.

This is true even if your business is 100% referral based. It still takes time and effort which equals money.

Given this there are two critical metrics you must know.

Your cost per acquisition and the lifetime value of your client.

Say it costs you $10 per lead and you make $100 per sale. And then they keep coming back over the years and re-spending? Eventually you make $1000 from each customer.

Obviously it makes sense to keep spending $10 to make that initial sale. In fact you could spend far more to acquire each customer while remaining profitable.

The key though is to know what sort of promotion will deliver this result.

Here’s are a couple of great examples:

And here’s the formula on how to calculate the lifetime value of your clients.

I have an excel spread sheet which will help you calculate these values – drop me a note if you’d like it.

Before I sign off, realise referrals are ultimately one of the cheapest and best ways of acquiring clients as there’s often already some level of trust conferred on you by the referrer.

However, it has to be done the right way. Something we’re working on with a client right now to provide a stream of good quality referrals in a very low key way.

If that’s something which would benefit your business, give us a call on (02) 9499-7958.

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