What is the value of a new customer?

The answer to this question guides every decision you make about your business. It not only dictates how much you can spend on acquiring customers, but it also dictates what options you have available at your disposal to acquire them and what systems you need to have in place to support and serve them.

How do you figure the value of a new customer?

  • Calculate the amount of the average sale to a new customer.
  • Multiply by your gross margin.

Example: You have an average first sale of $100. You make a 40% margin. Multiply 100 by 0.4; the first sale to your customer, then, is worth $40.

Congratulations, you made the sale.

The first step in building a business is making sales, but to really develop your business you need to “make” customers, by drawing them back to your services. It is much easier to sell to these same people again than it is to find new customers every time you need business.

The value of a customer should easily exceed the amount of profit made on the first sale. The questions you have to answer are when will they make another purchase and how much will they spend on that second purchase?

How you answer these questions will tell you what the value of each customer is to your business.

How you answer these questions guides what you do to attract and gain new customers.

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