Among the most straightforward ways to grow any business is simply to go out there and buy customers. That’s right…simply acquire customers. Do it well enough and you’ll have yourself a money tree!
What we’re actually talking about is investing money in marketing and sales in a way that brings in customers. In particular, recognising that real profits are made with repeat and referral business, among the most important goals of any business is to acquire as many customers as possible, each of whom can then be grown into repeat and referring customers. As long as you acquire each of those customers at an appropriate cost, then your business will grow reliably and quickly (and more and more profitably).
There are a number of critical principles to follow here; all of which are quite simple but many of which seem to be ignored or unknown:
Allowable Acquisition Cost
You can invest in buying a new customer almost as much as the additional profit you will make in the immediate future from that new customer. For example, if you are likely to make $1,000 in extra profit within the first month of winning this new customer, you can afford to invest several hundred dollars to win them, perhaps as much as $800 or even $900. This amount is called your Allowable Acquisition Cost. In this example, you would be investing $800, then getting back $1,000 almost immediately and then enjoying the ongoing lifetime value they bring through repeat and referral business. So, its instant profit….its a money tree! When you uncover marketing and sales tactics that satisfy this rule, you can just keep repeating them again and again, as quickly as possible, until they cease to satisfy the rule (if that ever happens).
Test and Measure
The idea of buying customers for your allowable acquisition cost is incredibly simple. The only thing it really requires is the persistence to test plenty of sales and marketing activities and the discipline to track their results. There is no limit to how many marketing activities your business can try and you are certainly welcome to have more than one money tree! You just need to try plenty and be sure to monitor and track the results of each. As soon as you discover an activity that brings you, new customers, at an average acquisition cost of less than your Allowable Acquisition Cost, you can then accelerate growth by increasing your investment in that activity.
Don’t be shy about it
It always amazes me how many businesses have incredibly high allowable acquisition costs (that is, they make high extra profit on acquiring a new customer) but hasn’t really tried to work out their tactics to create a money tree. Worse still, they often have a number of marketing activities in play that probably deliver new customers at lower than their Allowable Acquisition Cost but they simply don’t know and therefore don’t accelerate investment in those activities. Once you have tested an activity, and have calculated that it does deliver new customers at a lower acquisition than your Allowable Acquisition Cost, hit the accelerator! Make the most of this highly valuable knowledge and start pouring more investment into that particular activity.
I’d love to say it’s more complicated than that…..but I just can’t! It isn’t.
Test lots of different marketing activities monitor closely how they perform, and the moment you find one that generates new customers at anything below your Allowable Acquisition Cost, go for it! Do as much of it as you have time and capital to give to it and enjoy how fast your business will grow.
P.S. Whenever you are ready…
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