Welcome to the very first of the Surprising Sales Tip Series with me, Kim Fredrich, CEO of The Ventas Group.
Joining me today is Brad Eisenberg. Brad is a business operations consultant and strategist and his company BE Lean helps founders, CEOs and small business owners see what’s really happening in their businesses, fix what isn’t working and build custom, scalable operating systems that they can use to actually grow their business. So Brad has nothing to do with sales. But I’m going to ask him today what his number one top tip is for business owners to improve or increase their sales. Over to you Brad.
Brad Eisenberg 0:47
Thanks so much for having me. This is so much fun! I love that you’re doing this sales series and the first person you bring in as an operations guy. Right?
Kim Fredrich 0:55
Right. Because, you know, the thing is, Brad, all these pieces come together to improve sales. And so many business owners are, you know, managing this, that and everything else. And so anything that can help them with their sales, maybe it comes from somewhere surprising, like operations.
Brad Eisenberg 1:13
Yeah, I couldn’t agree more. So, you know, what is my top tip for growing sales? I’ll put it out there. First thing, my number one tip, know your cost of customer acquisition. That is my number one tip – know your customer acquisition cost, and here’s why that’s important.
When businesses come to me, when my clients come to me, what they’re looking for is a formula to grow their business, right? That’s what we all want, we just want this much that we can run on repeat and have the confidence that if we do it over time, our business is going to grow. Right? So to me from my operations worldview here, here’s that formula. And it’s super simple. Step number one is you spend money to market and sell your services, right?
Kim Fredrich 2:04
You do need to spend some money. That’s absolutely true.
Brad Eisenberg 2:07
You got to spend that money, right? That’s your cost of customer acquisition. So that’s step number one. When you get those customers, they give you money. So that’s your revenue.
And then you’ve got to probably spend a little bit more money in order to deliver those products and services to your customer. Those are your variable or direct costs.
And if you do those three things, well, you’re going to be left over with profit. That profit is what you use to grow your business, you invest that profit back into acquiring even more customers. And when you run that loop on repeat, that’s the formula for growing your business.
You get customers, you earn revenue, you deliver them goods and services, and you’re left over with profit. So it’s super important that you know what each of those three pieces are, how much it costs you to acquire new customers, how much revenue you’re getting from that and how much it costs you to deliver your services, so that you can actually make sure that you’re growing your business and are profitable, because what if you’re getting more sales? And what if you’re getting more customers, but that isn’t leaving you with any money in your pocket?
Kim Fredrich 2:55
So well, that becomes just wasted effort. Wasted effort and wasted resources. So your top sales tip is to understand what it costs to acquire your customer, what it costs to service your customer, and what you’ve got left over.
Brad Eisenberg 3:42
Yeah, what the profit is. And you can actually look at it. I call this the growth engine formula. How much profit are you making in relation to how much it costs you to acquire a customer? The more profit you make compared to how much it costs you to acquire a customer, the more scalable your businesses, the faster you can grow your business. So looking at those two things in relation to each other, your profit margin compared to your cost of acquisition will really give you that view of how scalable or how well you can grow your business,
Kim Fredrich 4:25
Or even if what you’re doing right now is in fact profitable. Because especially when you’re new in business, you’re excited that you made any sales at all. And not until you actually look at these things that you’re mentioning do you know if that is actually sensible to keep doing it. But you know what, Brad, this does sound a little bit complicated. I know that and you and I have talked about this before trying to determine how much it actually cost to acquire a customer is not always the easiest thing. So can you help people with this?
Brad Eisenberg 5:02
Yeah, absolutely. And, you know, this is something that I work with my clients on. And you know, I can help people with. And I also have a free tool available on my website called the growth engine formula. It’s kind of a DIY worksheet where you can actually go through the process of figuring this out for yourself.
But it really doesn’t have to be as complicated or complex as people think. I think sometimes people get tripped up with, well, how do I attribute certain customers to sales channels or certain lead sources? And whenever I hear that, I kind of pull back and say, like, first things first, right? Before you even try to figure out which of my sales channels are most effective? And which ones are, you know, least have the lower acquisition costs? Let’s just get a baseline of overall right across right with the strategies and methods that you can use to market and sell your business. What’s your blended cost? And it’s not that complicated.
Kim Fredrich 6:00
It’s, you basically, say, taking like an overview to get a sense for am I profitable at all? And then you can start to narrow it down?
Brad Eisenberg 6:11
Yeah. All of those sales and marketing costs, right? Think of all the things you do to market and sell your business. What are you spending on social media marketing? How much time are you doing email marketing? Are you hiring an outsourced sales firm, like The Ventas Group to do your sales for you? Or do you employ a sales team internally, and you pay them commissions or salary or whatever? All of that spend in your sales and marketing, just divide it by the number of customers.
And I typically like to recommend that people just start with like a year’s view? So just like look at last year, what was your total sales and marketing spend? And how many customers did you get? divide one by the other, you get your cost of acquisition. It’s not rocket science.
Kim Fredrich 6:53
It doesn’t have to be complicated. But if somebody wants to get into this and could use a little hand, they could reach out to you. So what’s the best way to reach you?
Brad Eisenberg 7:04
Oh, sure, you can go to my website. It’s beleanbusiness.com, B, E, Lean and business.com. Or you can just find me on LinkedIn. My name is Brad Eisenberg. I’m pretty responsive over there. And, you know, I’d love to hear from anybody who is interested in this topic and wants a little help figuring these things out.
Kim Fredrich 7:27
Well, this is great, Brad, I think that you’ve really given everyone some food for thought, a way to look at sales that people haven’t been talking about before. Something that is definitely a surprising sales tip. So thanks for joining me. I really appreciate your thoughts and your insights and I hope people check out the growth engine formula. Bye for now.
Brad Eisenberg 7:46
Thanks for having me.
Kim Fredrich 7:47
Okay, good to talk with you. Bye bye.
Transcribed by https://otter.ai
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