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5 numbers you need to track and why

Do you REALLY know what makes your company’s marketing and sales efforts successful? Do you have total control of your business’ marketing performance?

Are you able to explain what’s working and what’s not working in marketing? If it’s not, then here are five numbers you should start tracking.

Lifetime Value of a Customer

This is the most important number; it tells you what a customer is worth to your business over the lifetime of your relationship with them.

You need to know this, so you can figure out how much to spend winning customers.

To work to the number, you need to know:

  • How much a customer spends each year
  • Your gross profit margin
  • How many referrals each customer makes
  • How long a customer stays loyal to your business

Gross margin is the percentage of total sales that your business keeps as profit after deducting the costs directly related to producing the goods or services sold. You do not deduct overheads and expenses, only the direct costs related to the sale.

If you run a restaurant and a customer visits you five times a year and spends £100 their total annual spend is £500. If your gross profit percentage is 40% you make £200 profit a year.

Now, if they typically stay with you for five years the lifetime value is £1,000. But, if they make two referrals their value to you is an extra £2,000, so their total lifetime value is £3,000.

Cost of Acquiring a Customer

The cost of acquiring a customer is a mixture of marketing and sales.

You need to keep accurate records of were your enquiries are coming from, the market cost and the sales time. This will enable you to work out the most effective marketing tactics to use.

Sales cycle

This is the time it takes for a prospect to become a paying customer.

You need to track the lead source because you may find that different marketing produces faster sales. This can be better for your business than lower cost marketing that takes longer. You need to know this, so you can predict your cashflow forecast.

Sales success ratio

The sales success ratio is the percentage of prospects that become paying customers. Again, you need to track this back to the lead source, so you can figure out what marketing produces the most sales.

Campaign performance

This is the success of your marketing performance and allows you to work out the cost of creating a lead. Remember to keep a track of time and money spent on marketing.

Image from Flickr by Michael Ruiz.

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