Feedback Form
Home Features Mastermind Forums About Advertise Blog Network Contact Be An Author

Business How to Determine Client Acquisition Costs More Importantly Why Should You Know

Business How to Determine Client Acquisition Costs More Importantly Why Should You Know

What does it cost you to acquire and maintain a client? During my 25 years in business, I am continually surprised that small business owners, entrepreneurs, sales personnel and even executives in larger organizations cannot quickly identify what it is costing the organization to secure new clients and to maintain existing ones. Ongoing efforts through a variety of vehicles including marketing, referrals and cold calling are never truly measured to accurately determine client acquisition costs (CAC). Without knowing CAC, you are ignoring return on your investment (ROI) for not only your fixed marketing costs, but more importantly your customer relationship management focus may be on the wrong customers.

So how do you determine client acquisition cost? Simply speaking for every client, you delineate all costs associated to initially acquiring that client outside of fixed overhead costs such as utilities, rent, equipment, support salaries, etc. This becomes the initial customer acquisition cost and serves as a base.

Then you total up all the sales for the most recent year or quarter, if you prefer, along with the gross profit (total sales less costs of direct products and services). Also in a separate column, total up any new client acquisition costs. New client acquisition costs include sales personnel salaries and all those expenses associated with customer relationship management or CRM. Then add initial client acquisition costs to any new client acquisitions costs and subtract the gross profit from this total. The resulting sum whether positive or negative is your current return on investment in dollars.

Now you have established your baseline for return on investment. Next keep track of all referrals from each client including the gross profit as well as gross sales. What you will see that in many cases a client may have a substantial negative return on investment especially if you are trying to get your foot in the door or make a name for your company. However as sales and referrals grow that negative return on investment should turnaround and become a positive one.

The real purpose of this article and activity is for you as the small business owner to begin to measure and then manage your ever growing customer base. Without knowing your CAC, you could be investing thousands of dollars in clients who have low return on investment and potentially ignoring those clients whose value was unknown. And in some cases, you may need to fire a client because the additional CAC is draining your bottom line. Again taking from a very old adage, if you can’t measure it, you can’t manage it.

2006(c) All rights reserved. Leanne Hoagland-Smith - www.processspecialist.com





Business How to Determine Client Acquisition Costs More Importantly Why Should You Know - To learn more about this author, visit Leanne Hoagland-Smith's Website.

Like this article? Share it with your friends

Article Feedback
 Article Feedback No article feedback found.
  Leave Your Feedback
article feedback

Article Feedback
David Barr
David Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website

Casey Gollan
Casey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan's Website

Linda Richardson
Linda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website

Anne Barr
Anne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website

Kim Castle
With nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website

Jeff Foster
WebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas.  We specialize in internet consulting & internet marketing
- Visit Jeff Foster's Website

David Acheson
David Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns.  David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website

Leanne Hoagland-Smith
Are your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website


To learn more about the Evan Elite Author Program please contact us.

About The Author


Leanne Hoagland-Smith
(Visit Leanne's Website) Are your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/re d-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601.

Leanne Hoagland-Smith is a Platinum author on EvanCarmichael.com
About The Author

View Author Blog
View Author Blog

View Author Video
View Author Video

Free Downloads


Leanne Hoagland-Smith's

Complete
List Of
Business-Coach
Articles

Name
Email
Author's Free Downloads
Business Building Check List Icon Business Building Check List
Leadership Assessment Icon Leadership Assessment
Leadership Audit For Business Icon Leadership Audit For Business

More Leanne Hoagland-Smith
Increase Sales by Demonstrating Appreciation through High Business Ethics
3 Fact Finding Questions to Convert Your Sales Prospects into Customers
How Exploration is Part of the Sales Process
Top 7 Steps to Increase Article Writing Speed if Internet Marketing Is A Key Marketing Strategy
First Sell What the Customer Wants Not What You Want to Win More Sales
Why Confusion Between Vision and Mission Statements Hurts Sales Growth and Sales Managers
Scout with a Plan to Increase Sales
Poor Work Behaviors Begins with Poor Work Ethics
Translating Networking into Increased Business Dollars Growth Profits and Success
Business Results Begins By Developing A Compelling Vision To Communicate Why You Are In Business
Free Downloads


 
 
 


Evan Elite Authors
Dianne Crampton  
John Power  
Dave Kurlan  
Evan Elite Authors

Become An Author
Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details.
Become An Author

Evan's Latest Video
Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media
Evan's Latest Video

Business Opportunities
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"

How to Start An Online Business

Click Here To Learn More
Business Opportunities



Evan's Newsletter
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
Name:
Email:
Evan`s Newsletter

Free Downloads
Workplace Violence Icon Workplace Violence
The Flowing Point Icon The Flowing Point
Instant Newsletters Icon Instant Newsletters
Sample Credit Application Icon Sample Credit Application
Start eTutoring Business Icon Start eTutoring Business
Free Downloads - Complete List

Entrepreneur Tools and Guides
The Top 10 GTD Times Posts - Best Posts for Productivity
The Top 10 GTD Times Posts
Best Posts for Productivity
 
Top 50 Raising Capital Blogs To Watch In 2008
Top 50 Raising Capital Blogs
Top Blogs To Watch In 2008
 
Entrepreneur Tools and Guides

SEO For Africa
SEO For Africa
Olivia Baffour Annor Offinsu, Ghana,
Olivia Baffour Annor
Offinsu, Ghana
SEO For Africa

If I Were A Startup...
Catherine Daw, > $4 Mil in revenues
Catherine Daw
> $4 Mil in revenues
Jonathan Voigt, $214k to $507k in 2 years
Jonathan Voigt
$214k to $507k in 2 years
If I Were A Startup... - Complete List

Famous Entrepreneurs
P.T. Barnum, Barnum Circus
P.T. Barnum
Barnum Circus
Julie Aigner-Clark, Baby Einstein
Julie Aigner-Clark
Baby Einstein
Famous Entrepreneurs - Complete List

Entrepreneur Advice
Timothy Ferriss, 4 Hour Work Week
Timothy Ferriss
4 Hour Work Week
T. Harv Eker, Millionaire Mind
T. Harv Eker
Millionaire Mind
Entrepreneur Advice - Complete List

Popular Articles
(Premium Authors)

     Why Sales Professionals Should Never Prospect
By Bob Richards
     Lead Marketing- How to Work a Lead
By Bob Richards

Have A Suggestion?
Toronto Salsa Classes / Toronto Salsa Lessons Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
Have A Suggestion?

More Evan Carmichael
More Information