Now that you know how much you are willing to spend on acquiring a new customer the next part is easy… and very hard.
How many new customers do you want?
Infinity is a good long-term goal for the highly competitive but lets bound the question a bit.
How many new customers can you handle over the next year?
Consider your ability to:
- Service or supply your customers,
- Your ability to grow your capacity including capital costs and time to do so, and
- How big you really want to be and other factors.
Don't forget to include any customers you might lose over time in the equation.
Now multiply desired new customers by how much you are willing to spend to acquire a new customer divided by the average life of a customer relationship in years.
This is your optimum marketing and sales budget for the year.
Marketing is there to generate leads and sales is there to sign up your customers. You need to allocate to both pieces. Sales is leads times conversion rate (0-100%).
Your goal is to generate enough leads at a high enough conversion rate to meet your goals. If you can achieve this within the optimum budget you have… you have a very solid business model.
And infinity (at least within your market segment) may not just be a dream.
If not, you may still have a valid model, but you may need to further refine it and allocate more dollars to marketing and sales. Without sales you don't have a business.
