Cost of Goods/Services
In order to understand where your profits are coming from, and how much profit your company is making each year, you first need to know the cost of your goods and services. This includes all of the costs associated with your business: goods, payroll, products used to complete services, utilities and rent at your place of business, etc. Each of these things is an expense to your business, and you only make a profit when you have money left on top of that– you know that, of course. However, not all business owners know just how much profit they made because they aren’t tracking or paying attention to their costs. This is one of the most important financial metrics that you, as a business owner, should be tracking.
Cost of Customer Acquisition
The cost of acquiring new customers is a big deal, because it’s typically the easiest place for businesses to overspend and lose money. This metric consists of all of the money you’re spending to turn a lead into a customer. This is your marketing budget, which could be spent on payroll for marketing employees, Facebook ads, Pay-Per-Click ads, SEO, or even fliers. No matter how you’re spending the money, you should be tracking it very closely to ensure it isn’t being wasted on things that aren’t working. And remember, it costs more to acquire a new customer than it does to keep an existing one!
Where to Put Your Money
In order to know where you should be spending your hard-earned cash, you have to be tracking financial metrics. Knowing where to put your money means knowing what works for your business and what doesn’t. This could be in marketing dollars, payroll, business space, or even the products and services being offered. If you want your business to grow, you should be paying close attention to your finances and financial metrics, so you know just where to spend your money!
For more insights on marketing strategy that actually works for small business, subscribe to the FreshLime Newsletter here. Connect with Jay Bean, Founder of FreshLime and Small Business Marketing Expert on LinkedIn and Twitter. And last of all, if any of these tips have helped you or if you have anything to add please comment below. We’d love to hear from you!