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Avoiding Mistakes of the Past - A CFO's Checklist

All business owners can look into the rearview and see mistakes they've made down the road. Whether it’s making a bad technology investment, hanging onto a painful client, or just not embracing the bigger picture, these potholes can hurt at the time, but shoul.....

Business - 4 min read

It sounds like an easy question to answer: Who are your most profitable customers?

But when it comes down to it, many business owners struggle to provide a definitive answer to this question. After all, customers are not always equally profitable. Some of the faces you see most frequently may not be the ones that actually help your bottom line.

In this post, we’ll look at several ways you can identify your most profitable customers and then examine what you can do with this information to drive your business forward.

 

Identifying Your Most Profitable Customers

The following strategies can help you to pinpoint the customers that drive value and don’t detract from your bottom line.

Familiarise Yourself With Customer Lifecycles

Some customers arrive and use your products or services once, but then go on their way, never to be seen again. Others will return month after month and year after year. You may have to expend the same amount of marketing to attract both kinds of customers, but the return on your lifetime customers is exponentially better than the return on your one-off sales.

Once you understand the profile of customers who tend to become repeat customers, you can start targeting them early on and even market specifically to that customer segment.

Continually Analyse Customer Data

An up-to-date list of your ten best customers can help you to focus your efforts and identify whether a new profile has emerged into your top ten. To gain this valuable information, you’ll need to continually analyse customer data. Make this analysis a priority along with your other essential financial statements.

Don’t Waste Time Chasing the Wrong Potentials

Some business owners assume that their most profitable customers will be big customers, like government entities or other businesses, and in some cases this assumption holds true. But without data to back up this assumption, you might be missing out on precious opportunities.

In some industries, a large volume of smaller customers can be more profitable, but you won’t know if this is true without ongoing analysis of your company’s data.

Track the Cost of Servicing Each Customer

Do you know how much it costs to serve your customers? Do you know if some of your customers are more expensive to you than others? In most businesses, there is great variety in how much each customer costs.

Take real estate, for example. Real estate agents spend much more time with some customers than with others, even though their gross earnings might be about the same with all of them. If you can learn how to screen customers before investing significant time with them, you’ll have identified your most profitable customers and be well on your way to improving your bottom line.

 

How to Capitalise On Your Newfound Information

Once you’ve identified your most profitable customers, you can focus on cultivating those relationships. You can change your marketing and prospecting to search for the kinds of customers who will be most profitable in the long run. You can build your relationships with current customers who are profitable and spend less time on those who will likely be gone tomorrow anyway.

And with increased profits, you can have the luxury of deciding how to apply those funds to reach your long-term goals, whether you’d like to hire new talent, expand into new territories, explore new product lines and services or purchase additional equipment or properties.

 

How CFO Services Can Help

You have so much to do on a daily basis to keep your business running and thriving. Outsourcing your CFO services in order to get the accurate, timely reporting that will help you to identify your most profitable customers will help you to stay ahead of changes down the road. To learn more about our CFO services, get in touch with us at Altus. We’re here to help you succeed.

 

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