Last time, I talked about companies that may not have enough capital to succeed. The second common way that businesses fail is around poor Sales and Marketing. I want to differentiate the two functions. The job of Marketing is to get people or businesses to express interest in your business. This is the creation of Leads or Prospects. The job of Sales is to take those Leads/Prospects and convert them into Customers.
A metric to think about in this mode is the "Cost of Customer Acquisition" (COCA). The way to figure this out is to divide the spend on Sales and Marketing by the number of new clients. If you spend, $10,000 on Sales and Marketing and have 100 Customers, then your COCA is $100. This number is important because it defines how much value each customer costs you incrementally. If you are selling a haircut for $20, then $100 COCA is a bad number. If you are selling Luxury Yachts, $100 is an awesome Cost of Customer Acquisition. A good COCA is very dependent on the business.
One thing to note is that various Networking and Referral Marketing systems are relatively low cost from an out-of-pocket standpoint. However, time needs to be considered. For example, I am a member of BNI. BNI recommends that you spend about 3.5 hours a week on meetings with other group members. If you have an hourly rate of $50/hour, then this costs $175/week or $700/month or $8,400/year. Without pocket expenses, this is really $10,000 per year. There is nothing wrong with spending $10,000 on Sales and Marketing if you get your money back.
So, when we are talking about having an efficient and effective Sales and Marketing process in your company, calculate your COCA. You can break this down and see what your cost for different Marketing Channels is. You can look at your Sales Conversion Rate for your Marketing Channels. With that information, you can begin to understand if you are being effective.
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