Impressions - March 2015 - 53

wrong with the most perfect job. At some
point, you will mutually decide to part
ways. Hopefully there won't be too many
of these.
The next reason to add new customers is to grow the top-line revenue of the
business faster than you can with other
methods. Top-line revenue is emphasized
because simply adding new customers
does not add much to the bottom-line
proﬁt - at least not in the ﬁrst year or
two. Adding new customers should be
considered a long-term investment.
Finally, you may ﬁnd yourself in the
position to reduce your exposure to big
customers. This happens often with contract printers. Customers may start small
and then start to dominate production.
After major growth, they leave for a bigger
contract printer with cheaper prices, better terms, faster turnaround times or something else. This happens all the time and
the contract printers ﬁnd themselves with
a huge hole that needs to be quickly ﬁlled.

COST TO ACQUIRE
Marketing has changed a great deal
in the past few years as more ﬁrms move
online and go digital. The amount of
advertising "noise" now is so great that trying to gain new customers with a few ads
and ﬂiers is like yelling into a windstorm.
Not only are you faced with more competition for attention, but the sheer number
of ads, emails and other messages simply
is overwhelming.
Getting and holding a prospect's attention requires much more research,
targeting, messaging, education and engagement. This is expensive and - more
importantly - time consuming. One recent study on customer engagement and
development revealed that it takes nine to
16 months to attract a new major client
(one with the potential of generating 5%
of revenue), depending on the industry.
Many small businesses are disappointed
or disillusioned by the response to their
advertising and marketing spends. It's understandable because there's no order or
system to it. They don't measure or track
their responses or efforts. This often is
called "hope marketing." It's akin to gambling and the money spent is completely
at risk.
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If you're losing customers because they
aren't a good ﬁt, then change the way you
attract prospects. Deﬁning the exact proﬁle of your ideal customer is necessary
to determine if he truly is a good ﬁt for
your business. It's pointless to spend time
and money acquiring a new customer that
you'll struggle with moving ahead.
How much will this actually cost? The
cheapest approaches are word-of-mouth
(WOM) and client referrals. While not free,
you're really measuring opportunity cost:
the expense of your time if you were using it
to produce billable product instead of prospect development that may not convert.

Deﬁning the exact
proﬁle of your ideal
customer is necessary
to determine if he
truly is a good ﬁt for
your business.
WOM and client referrals only go so
far. While they're still the most common
ways to market for small companies, they
are random, undependable and unpredictable. In the bigger picture, you can count
on some percentage of growth from this
area, but it's variable.
How much budget should you set
aside for marketing and sales to acquire
new customers? The numbers vary by industry. They range between 4% and 60%
of top-line revenue. For industries similar
to ours, the range is 4%-20%. Even if you
are a small shop with $200,000 in annual
sales, the range would be $8,000-$40,000
per year, or $667-$3,300 per month.

OTHER COST FACTORS
New clients don't know you and are
looking for you to prove yourself to them.
They're taking a risk to work with you
and, as such, want to minimize the risk.
Therefore, the focus usually is on price.
You can gradually raise prices, but it's a
slow process. Take that into consideration
when negotiating your ﬁrst order.
New customers also often are considering other vendors. Your competitors also
want the business and most often use price

as their club. Customers so focused on the
cheapest price never are loyal. Thus, you
run a high risk of spending time and money
to develop a transient relationship.
Finally, there's a proven strategy to
break even on the ﬁrst job so you can profit in the future. Simply put, if you know
your costs, look to bring on a new client at
the break-even point. Your pricing doesn't
have to be rock bottom, but you need
enough margin to cover your acquisition
cost. There are numerous examples and
strategies that prove longtime clients are
much more proﬁtable than new ones.
A study by the Harvard Business Review tracked multiple industries' client
retention during a six-year span. The average proﬁt annually for a one-year customer
was 6% on sales. Remarkably, the average
proﬁt for a six-year client was 43% on topline sales. That's an enormous difference
and the driving reason to do everything in
your power to retain an established client.

EDUCATIONAL COSTS
For decorators working with schools,
community organizations and nonproﬁts,
the time spent answering numerous questions, getting committee approvals and
anything that isn't directly tied to production can eat up all your proﬁts. It's a
huge problem for small operators working
out of a storefront location where random
walk-in trafﬁc is common.
Another part of the educational element is the time spent explaining why
you differ from the competition and how
it's reﬂected in your sales prices. These
conversations take considerable time to
develop. To speed them along, you need
"social proof." This has become a big
deal in the past few years with the rise of
social media.
It comes down to how you independently prove your claims. This is the cost
of your online reputation - Yelp, Google,
Angie's List, BBB, reviews and so on.
There's a cost to maintain your account
on many of these sites. They range from
$10-$30 per month. If you do a lot of local work, it's deﬁnitely worth being on the
major sites.
Develop your proﬁle. Get reviews and
testimonials. Respond to others posting
about your company and your performance.
March 2015 | Impressions

http://www.impressionsmag.com

Impressions - March 2015

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