Contact Us : 1-888-893-8778


http://stopleakingmoney.com

Home » Business Information-Gathering Guide

Business Information-Gathering Guide

 

There is often confusion over what information the business needs to have to operate intelligently rather then subjectively. There are so many attributes that you can look at and measure but which are the most important and the most useful?

It is hard to say which information is the most important as it often depends on the business, the target market and situation the business is in currently. However one piece of information is always important and is a cornerstone to a great many other important measures:

Average Customer Value

Average Customer Value (ACV) is the value to the business of the average customer based on how much money they typically bring into the business. It can be measured on an annual basis or a lifetime basis. Both numbers are useful and both should be known. ACV forms a key measurement that much other critical information derives from or relies on.

The Average Customer Value measures what a customer is worth to you on a yearly basis or for the whole time they are a customer, the “lifetime” basis. It is important because with this knowledge you can determine exactly how much you can afford to spend to acquire or retain a customer and how much profit you can make from that customer and many other critical decisions.

How to calculate Average Customer Value?

The process is simple.

Take the total sales to all your customers and divide it by the total number of customers.

Additional Calculations for Insight:

  • Determine the total number of customers for the business since inception or a set recent number of years based on the data that is on hand.
  • For each customer, calculate the total purchases made by that customer alone. There may be a wide variation of total purchases depending on factors such as breadth of product/service scope, repeatability of customers, and longevity of the business.
  • Plot this data on a chart so you can see the lowest amount of sales for a customer and the highest amount of sales.
  • Plot the majority of customers on a chart to determine where the majority of customers fall in terms of low and high sales figures.

Historical results are no guarantee of future success, however taking the time to understand the history can reveal future opportunities for the business.

 

Share

You must be logged in to post a comment.