How does Customer Count Impacts a Business?

 

Last time, I posted about the number of Customers that you need to have a successful Business.  This week I want to show how this greatly impacts a couple of parts of a company. As I have said, most any type of company can be made to work.  The question is what you must do is think about how to make it work.

The first 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.  But think about it.  If you need lots of customers, then COCA needs to be very efficient.  Many customers mean that you will be acquiring them often.  Processes that are repeated regularly, the more efficient the better.

Another aspect of customer count is Billing.  The more customers the more important that is.  Many businesses use Merchant Banks to accept Credit Cards as the primary form of payment.  For example, a Hair Salon may have 100 customers per styling station per month.  With an average spend of (for example) $100, that means that there could $10,000 of transactions.  Each 1% of Merchant banking fees is $100 in this example.  Credit Cards make is simple to receive cash quickly and can isolate businesses from many payment issues.  However, Credit Cards are a relatively expensive way of collecting payments.  There is a tradeoff between the number of invoices to issue, the timing of payments, and the method of payment.  All of this depends on the number of customers that a business has.

These are two of several processes inside a business that are impacted by customer count.  All these processes need to be accounted for in the Business Plan as it is developed.

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

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