Small Business Owner Insights

If you buy something from me one time for $10, that represents $10 of value to me. And that is where most business owners stop. However, if you come in my shop 4 times a month and do so for a year, that is $480 you represent to me.

Once you look at it like this, several things become immediately apparent.

• It is to my advantage to try to get you to come back because I only had to market to get you in the store once. If it costs me, on average, $1 of advertising to get a new customer, that means if you come in one time, my marketing costs are 10%. However, if you become a repeat customer for a year, that means my marketing costs are less than a half a percent (this, in case you did not know, is a good thing).

• If I know I have an average net profit of 10%, that means I can spend any amount up to $48 in a given year to make you ecstatic and still not lose any money.

• If I have a choice between marketing to get new customers and marketing to my existing customers, the later has a higher payoff by many orders of magnitude.

In order for any of this to work, you must have a firm grasp of the numbers in your business. If you don’t, stop everything right this minute and don’t do anything else until you understand where every dollar is going.