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Why Your Need To Know Your Numbers When Developing Your Marketing Plan

When measuring the success of a marketing plan a lot of business owners make the mistake of only focusing on website views, social media likes, and new leads. Don’t get us wrong, these key performance indicators (KPI’s) should be measured and reviewed regularly BUT to ensure that you are heading in a truly profitable direction you need to take your marketing and sales planning a step further. Talk to your bookkeeper or accountant to figure out how to accurately measure the following data so that you can use it to drive your marketing strategy.

1) Measure The Net Revenue Of Target Audience

Knowing the net revenue of each client will help you accurately determine who your most profitable clients are, which clients (if any) are costing your business money, and who you should be targeting with your marketing and sales efforts. It’s easy to make assumptions when it comes to client profitability and use these assumptions to drive your sales and marketing efforts.

For example: Henry owns a construction company with 3 key target audiences – New developments, luxury home renovations, luxury home builds. He made the assumption that new developments are his ideal target audience as they are long-term contracts, their invoices run into the millions and they allow him to build and maintain a large team. Reviewing his true net revenue by target audience revealed that after labour costs, overtime, materials, project management costs, accounting, office management, legal fees and delays that this target audience wasn’t as profitable as he originally thought and that his renovation clients were actually more profitable on average.  

While there may be times when your assumptions are correct we always suggest trusting your numbers rather than your gut when making strategic marketing decisions.

2) Know Your Client Acquisition Costs  

How do you find your clients? What is your cost of advertising to each target audience? How many hours a week do you spend on marketing and sales? How long is your sales cycle? How much time does each marketing activity take? These are all questions you need to know the answers to so you can determine which clients are worth pursuing and which marketing efforts are the best ones for obtaining them.

For example:  Sally owns a yoga studio and to attract her ideal client she advertises on Instagram & Facebook, writes one blog a week and spends 2 hours a week networking. On average Sally brings in 6 new clients a week who purchase the introductory class offer which is $40 for the month. Out of the 26 new clients per month, only 5 continue on as annual members after the intro offer expires.

When Sally breaks down her time and costs and income it looks like this:

Social Media Advertising – $600 per month – Brings in 15 clients per month = $40 per lead

Writing a weekly blog – 10 hours per month x Sally’s rate of $60 per hour = $600 – Brings in 3 clients a month = $200 per lead

2 Hours of Networking – 8 hours per month x Sally’s rate of $60 per hour = $480 – brings in 8 clients a month = $80 per lead

Total marketing = $1680 per month

Total income from the months marketing efforts = $1040 for month one, $600 for month two

So for each month of marketing, it takes 2 months for the efforts to break even and the average cost per new lead acquisition is $65.

Sally dives deeper and realizes that the clients who are most likely to continue after the introductory offer are women in their 40’s who have back issues that she targets through her Facebook advertising and people she has built a personal connection with through networking.

Looking at the numbers Sally determines that writing her blog isn’t worth her time and puts that money into social media advertising. She spends more money targeting the demographic that is most likely to continue on an annual membership and as a result, triples her monthly leads. Her cost per lead is reduced significantly, her revenue has increased and she has saved herself 10 hours a month of writing tasks.

Without diving deeply into your marketing efforts and measuring the ROI of each effort you won’t be able to streamline and improve your marketing strategy and long term revenue.

 

3) Know Your Customer Lifetime Value (CLV)

It’s widely known thanks to Pareto principle that 20% of your customers generate 80% of your revenue. This is why knowing your CLV is so important. This metric is an easy calculation and essential number to know when reviewing your retention strategy and determining your future target audiences.

To calculate the lifetime value of a client simply add up the gross profit they have brought to your business over the course of their time as a client. In addition, it’s beneficial to note the length of time they have worked with/ purchased from you and if known how they found your business.

You can use this information to create target audience personas that are based on your most profitable clients for marketing purposes, to help with the creation of client appreciation campaigns, account development, and retention plans and to predict your future revenue.

For Example:

Jennifer owns an e-commerce business and spends a lot of money marketing her products on social media to attract new clients. Once Jennifer started measuring her CVL as a key metric she was able to determine which campaigns were the most profitable long-term, cut the campaigns that were only bringing in one-off clients and build stronger nurturing and retention campaigns to keep customers who were loyal to her store coming back, increasing her overall revenue.

In this new era of online marketing what was once thought of as a creative, whimsical industry filled with fun swag and events has turned into a data-driven almost scientific one that relies heavily on the bookkeeping and accounting industry.

To ensure that your small business continues to grow successfully you need to make sure you talk to your bookkeeper or accountant to solidify that your growth strategy makes sense and that your marketing spend is bringing you the right ROI.

3 ways to profit from your construction business

giphyRunning a construction business can be a daunting task with its own unique set of complexities, as many business owners struggle to make a profit once they’ve taken into account their fixed and variable costs.

Below are three ways to help raise that bottom line!

Fixed vs. Variable costs

Fixed costs are those that need to be paid, no matter if you’re getting jobs or not. These include payments such as auto, telephone, rent, and insurance. Make sure you’re fully aware of what your fixed costs are, as this will help when deciding if you should take a job or not (more on this below).

Variable costs, on the other hand, are directly related to income. A big variable is your Cost of Goods Sold (COGS). COGS are the direct costs associated with the production of goods sold including materials used and labour, but not distribution and sales cost.

In an ideal world, COGS should only be costing you 50% of your total income. You can work towards achieving this through marking up the cost of materials by about 10-15% in order to cover both their variable and fixed costs over the long-term.

Subcontractors vs. Payroll

Many construction business owners are reluctant to put workers on payroll and opt for subcontractors instead. Although it varies from company to company, it’s worth considering payroll. The price of subcontractors can add up, as many business owners end up absorbing the costs of WCB (if their subcontractors don’t have a number). Subcontractors have to pay their own taxes so tend to charge the busines owner a higher hourly rate.

However, putting employees on payroll also comes with its own set of taxes and additional charges (you’ll need to hire an accountant to take care of it).

Look at the bigger picture

Although it’s a hard decision to make, sometimes it’s better to turn down a job if it’s not worth it — the income barely covers the variable costs or you’re breaking even. In these situations, it’s wiser to use your energies towards finding a more profitable job.

If you look at your income and expenses on a month to month basis, rather than a job to job basis, it’s easier to see the bigger picture and make these decisions. It’s helpful to look beyond whether the money you’re making on a job covers the expenses for that particular job. Although you’re making a profit in that case, it doesn’t necessarily mean it’ll be enough of a profit to cover your fixed costs as well.

Check out a great example of a construction company’s P&L statement here. It should be noted that this particular business has three partners.