Need An All-In-One, Cost-Saving Solution? Business Owners, Read On!

“Rule No. 1: Never lose money. Rule no. 2: Never forget rule No.1.” This is one of billionaire businessman Warren Buffet’s more famous soundbites. And, as he is arguably the world’s greatest stock investor, we can safely assume he knows what he’s talking about. The ultimate aim of any business is to make money, not lose it. And businesses make money by bringing in more than they pay out. It’s pretty much the first rule of economics. Get a good return on your investment, and your bank balance will thank you.

So, how do you do this?

You sell stuff. Lots of it. However, to sell lots of stuff, you need lots of customers. To find those customers, you need to spend a little time and money investing in sound, proven ways to acquire them. All the while, however, bearing in mind our Golden Rule: Never lose money. If the cost of acquiring the customer (CAC) is more than the projected lifetime value of that customer (LTV) then you’ve already broken that rule before you’ve even started.

So, What’s The Solution?

Business owners have grappled with this problem for years, but this well-worth-reading article explains it thus:

“To compute CAC, take the entire cost of your sales and marketing functions, (including salaries, marketing programmes, lead generation, travel, etc.) and divide it by the number of customers you closed during that period of time. For example, if your total sales and marketing spend in Q1 was $1m, and you closed 1000 customers, then your average cost to acquire a customer (CAC) is $1,000.

“To compute LTV, look at the gross margin associated with the customer (net of all installation, support, and operational expenses) over their lifetime. For businesses with one time fees, this is pretty simple. For businesses that have recurring subscription revenue, this is computed by taking the monthly recurring revenue, and dividing that by the monthly churn rate.” (Churn rate is the annual percentage rate at which customers stop subscribing to a service).

Once you know your CAC and LTV rates, you can start formulating a plan that makes the former much higher than the latter.

How Do I Do That?

Sometimes in life, we find problems to which it is hard to find a solution. Business owners struggle to monetise their hard-won customers in a profitable and sustainable way. It’s common to invest so much time, effort, and yes, money into acquiring a customer that we forget to put any thought into what’s going to happen with that customer going forward. Did we spend thousands on digital marketing efforts to win a once-off customer who spends R100 and is then never seen again?

CAC vs LTV is tricky. Or, more accurately, the LTV part is tricky. Customers are fickle, and it’s not always possible to know why some leave and some stay. We can do our best to retain them, but it’s not always something we can control. What we can control, however, is our business overheads. It’s a no-brainer that if your business’ running costs are lower, your CAC is too. There are many ways in which you can reduce your overheads, but one of easiest and most effective is to switch to Managed Services.

The Benefits Of Managed Services

There are many benefits of using managed services. By switching computing to cloud services, you get a access to the latest server hardware and software without having to buy it. This means you can finally ditch expensive data storage and email servers. In addition, web-based software doesn’t require complex installation or maintenance, meaning you save on IT support.

Other advantages include:

• More predictable cash flow: Your IT provider will send you a regular monthly bill for all your ongoing, proactive technology management. This makes budgeting easier and your cash flow more manageable.
• Ongoing Tech Support: With a managed services agreement in place, you get ongoing and regular updates, security patches, and performance checks as part of your package. This means you can fix problems before they even become problems! All of which means lower costs, decreased downtime, and better performance.
• Build A Relationship: With traditional IT services, you call in the tech guys when something breaks. This doesn’t allow for the building of a real relationship between your service provider and your business. Using longer-term, managed services positions your service provider as a partner who, over time, develops a deep understanding of your business and its needs. Strategically, this means they move beyond using technology purely as functional support, and transition to a more sophisticated and beneficial level of integration between your technology and your business goals.

When you partner with Huge Connect, you get a single telecommunications service provider who takes care of everything for you. One point of reference, one bill, one call to make in case anything goes wrong. If you’re an SME looking for a reliable, single service solution for your business,  let’s connect.