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?