Inspired by Peter Cohen’s blog post about How Much Marketing Spend is Enough, the calculator below will help you determine what your client acquisition cost is compared to their lifetime value.
For business owners, this tiny piece of data is one of the most critical bits of information that you should track on a consistent basis. If you don’t know this number already, check your performance below.
If you are in early stages of starting a business, this is definitely worth the time. It is also imperative that you are brutally honest about your numbers. This is not the time to present the hopes & dreams numbers that you used with your potential investors.
If you have not started your business yet, use the calculator below with honest projections. This will help you get a feel for where your price needs to be to survive IF you are able to deliver the number of clients that you hope.
Tips for using the calculator:
-Type numbers in the BLUE fields only
-If this is your first year, the first two sets of numbers (New, ALL) will be the same
-If you are not a recurring revenue model, the Avg. lifetime of clients will be 1
-Include salaries, commissions, and marketing spend in the Sales/Mktg Costs
-This is not an end-all to all costs. You must also have solid budgets for R&D, Operations, and other important aspects of your business worked out.
After using this calculator on bigWebApps’ 2008 numbers, I was very pleased to see a 2.40 score. Due to a few big deals early in 2009, our number is an unsustainable 6.78 which should correct over the course of the year.
What’s your score? Have any feedback?
Outside of the standard requirements for any business to succeed such as revenue model, marketing and acquisition costs, and so on; you also have three key areas where the relationship between your potential clients and your application must work together seamlessly.
As has been pointed out countless times on SaaS model success, the real key is scalability. The following three attributes of your application will have huge impact on whether scalability is something you will be able to achieve.
1. Self Setup – Self Setup is the most important “feature” that your application will need to scale your business. Once you have targeted beta clients, immediately start working with them to design how they will be able to get running on your application without you. The self setup should start immediately after someone clicks the “Free Trial” or “30 Day Demo” button on your website.
One of the major differences between SaaS and traditional software is that setup process begins prior to your sales process does.
2. Self Signup – As you are getting launched, sales/signups are not as critical to be automated as setup is. If you are manually having conversations with people through the sales process in the beginning, you will learn what the roadblocks are to purchasing your product. The knowledge that you gain throughout this process will be invaluable to writing effective copy and to designing your site’s sales flow to best suit your potential customer’s needs.
This is closely related to self setup because your potential customer’s experience during that trial period will be the first impression that he remembers when making the decision whether to type in their credit card number.
Self signup is the actual transition between trial and paid. If you plan on launching with a freemium model, this transition period will be laced into your application when your customers hit feature/size roadblocks. Offering them compelling reasons to upgrade, and more importantly, an easy way to act upon that decision could decide your success. Once again, automation on this is not a requirement to get started if you are looking for the specific reasons why people are not buying. But implementing this should be early in your timeline.
3. Self Help – Prior to launching your product to beta and then full production, it is critical to have dead-nuts simple avenues for your customers to reach you. But you do not need to be in self-help mode just yet. This is primarily due to the fact that you won’t know what problems/questions your varied customers are going to have until they have them.
It is absolutely critical to have the record button pushed at all times. When it comes time to start writing the self-help material for your application, you will be able to quickly reference your real world feedback ensuring the help material is focused on problems that real people have instead of on problems that you “think” they might have.
photo credit: purplepigswithfigs
People say “thanks” when they’re not actually thankful for the other party’s action. At this point, it’s almost a substitute for “goodbye.” And due to this, it is greatly cheapened. I agree with the other party in that regard.
But it’s been taken a step further in that saying “thanks” puts you in a “position of weakness.” I whole-heartedly disagree.
Here is a post by Seth Godin that happens to be quite timely to our conversation. I’m posting the entire post since it’s so short (as Seth does so well).
Do you deserve the luck you’ve been handed? The place you were born, the education you were given, the job you’ve got? Do you deserve your tribe, your customer base, your brand?
Not at all. “Deserve” is such a loaded word. Most of us don’t deserve the great opportunities we have, or the lucky breaks that got us here.
The question shouldn’t be, “do you deserve it.” I think it should be, “what are you going to do with it now that you’ve got it?”
When someone takes time out of their day to share with us a bug in one of our applications or watch a webinar where we are spouting off about something we created, I am deeply thankful for that person doing so. What motivated that person to spend their time from a busy day to share with us? And more importantly, how/what can we do to deliver something to them that makes our next event with them go on their “can’t miss” list?
If that puts me in a position of weakness, then I will gladly serve that role.
In closing, I would like to say that you taking your time to read this trivial email is appreciated by me. If it was worth your time, I look forward to the next opportunity you give me to chat with you.
Photo Credit: http://flickr.com/photos/psd/
We have been talking about doing webinars for somewhere around 5 years now. We have tinkered here and there with pseudo-webinars, but we never fully committed to launching one with full force.
There are several factors that have played into us putting this off, but it mainly comes down to fear. Are we going to be good or entertaining enough? Will our presentation present information that is considered valuable to the audience? Is our product good enough to present to an audience where we will not be receiving instant verbal feedback for 20 minutes?
Of course, we had excuses, too! Which one of us has the time to set up a webinar? to practice it? to build it? Who internally has the skills to pull it off?
Fear is a crazy thing. And it always amazes how fear of something strikes different people in completely different ways.
I am very proud to announce that Patrick Clements has stepped up to the plate for bigWebApps‘ first REAL webinar. Patrick has been slaving away for about three weeks building, honing, and practicing his presentation. In about an hour from right now, bigWebApps will be moving into our very own “webinar” era.
What’s the webinar covering, you ask? We are releasing a new product to our suite. bigWebApps Warehouse is a complete warehouse and inventory management tool allowing you better control and visibility into your supplies process.
Wish us luck!
(NOTE: there is no link to the webinar because attendance is already FULL! – ROCK!)
photo credit: http://flickr.com/photos/stuant63/