7 Simple Numbers That Will Grow Your Business

One of my main business mantras is "Know Your
Numbers," and because numbers are the
language of business, it is numbers that will
ultimately determine your success.
Business is literally a numbers game, but what
numbers should you know?
Here are seven metrics that will give you
predictive results you can measure and manage
for more sales and bigger profits:

1) The lifetime value of each customer. While
there are more complicated formulas to
determine this value, this simple version will give
you a start:
If your average customer spends $20 per
purchase, buys three times a year and stays with
your business for five years, the customer's
lifetime value to your business is $300.
$20 x 3 sales = $60
$60 x 5 years = $300
Now you have a working understanding of the
worth of each customer and the types of
resources you need to acquire and retain them.

2) How much it costs to acquire a new
customer. I call this your Cost Per Acquisition, or
CPA, and it can help determine how much you
spend on any marketing or ad campaign.
Let's say you've placed an ad in your local paper
for $200. You get 20 responses and 10 sales. The
acquisition cost for each customer is $20 ($200/
10 = $20).
If your offer results in at least $20 in profits on
every sale, you've run a successful campaign. But
if your CPA is $20 and you have little or no profit,
or are acquiring customers at a loss, it's time to
re-evaluate your marketing.

3) Conversion rates. Let's say you hand out
flyers to people on the street. The campaign
generates 1000 leads over a two-week period,
and 100 of those leads buy. Your conversion rate
is 10 percent (1000 leads / 100 new customers =
10 percent conversion rate).
Too low? Nowhere to go but up. Tweak flaws in
your sales process, increase customer service,
narrow your target or create a better offer.
Knowing where you are is half the battle in
getting to where you need to be.
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4) Your average dollar sale. The value of each
sale is important if you are looking to generate
repeat business or up-sell -- in other words, the
"Would you like fries with that?" strategy.
Simple "add-ons" can add-up quickly. For
example, a deli offering premium sides and
bottled drinks increased average sale from $5.42
to $13.11 with a simple "up sell" script that
increased overall revenue 144 percent within a
few weeks' time.

5) Response rates. Conventional direct mail
response rates will vary from 1 percent --
generated by using lists from a list broker -- to up
to 5 percent -- generated by using what I call a
"warm" list of current or past customers.
Online email response rates are generally
around .1 percent. That means, to get 50
responses to a conventional direct mailing, you'll
need to mail to a minimum of 5000 names with a
great offer.
To get 50 responses from an email campaign,
you'll need at least 50,000 names, knowing not
every response will end in a sale.

6) Lead-to-sale-ratio. If you're in a business-to-
business, professional services category or have a
long-term sales cycle, your lead-to-sale ratio will
give you an idea of the audience you'll need to
target to actually close a sale.
Say your startup insurance business needs 10
prospects to generate five meetings to produce
one client. To get 1000 clients, you'll need to
prospect 10,000 people.
If your conversion rate is 20 percent, you can add
value, guarantees or other ways of reducing real
or perceived risks to increase your conversion
rates to a 5:2 or 5:3 ratio.
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7) Touches to sale. How many contacts or
touches does your prospect need before they
buy? The general rule of thumb in sales is that:
Two percent of sales are made on the first
contact/touch
Three percent of sales are made on the second
contact
Five percent of sales are made on the third
contact
10 percent of sales are made on the fourth
contact
80 percent of sales are made on the fifth
contact
It's generally accepted that on average, you need
at least four to seven touches for a sale. So when
should you stop touching? When you're asked --
otherwise, you never know when the timing is
finally right for a sale.
Knowing your numbers and what numbers to
know in the first place greatly empowers your
decision making, and helps you better predict
how your business will fare.
If you do your numbers and discover you need a
10,000 person database to get 1000 customers,
your marketing plan is pretty simple: Get a list
and an offer, then track and convert your results.