How to get the right customers for your business and how to count them?
Why do most startups fail? Because of a bad technology? Because of a bad team and execution? Because of a not working marketing machine? A major point is because of missing customers who are willing to pay for what you offer. There are tons of different business models out there. B2B (Business to business) vs. B2C (Business to customer) or offline vs. online are very important differentiations. But everyone has one of the same challenges: sell your shit. Otherwise it is very, very hard to survive, you probably cannot make a living out of love. Of course, there are some other examples like Facebook, Instagram, Snapchat and so on, who offer a free service but they have a completely other business model and I would not focus on them today. There it is very simple: you as a customer are paying with your data, but I guess almost everyone got this until now.
As mentioned above for me the most important differentiations are B2B, B2C and offline or online. That will also be the focus on today.
There are two very, very important KPIs when talking about marketing, sales and startups: CAC and CLV. I will describe them shortly and why they matter a lot:
CAC means Customer acquisition costs. In concrete that means how much money does it cost me to acquire new customers? It could be calculated when you sum up the total marketing campaign costs related to acquisition and divide this up with all won customers, for example for a month. For example, if you invest 200k€ per month for customer acquisition and win 200 customers out of this than your CAC is 1.000€.
CLV means Customer lifetime value. In concrete that means how much money does a customer pays you for his whole customer time. This KPI is a bit harder to calculate but we will also shortly try. It is the sum of all expected revenues less invest in a business relation divided by the minimum interest rate per period.
Why are both KPIs that important? If the CLV to CAC ratio is too little (e.g. 1) your business model will probably not work because you are spending too much to win new customers. If the ratio is to high (e.g. greater than 5) you maybe miss out on new business as you are spending too little to get new customers.
I would say those KPIs are very important for subscription-based business models like you maybe know it from your Mobile Provider, Netflix, Apple Music and much more.
How do those businesses gain new customers? Maybe you get an idea when you rethink how you were getting attention to those businesses. There are lots of different paid and unpaid possibilities like: TV advertising, SEO (Search engine optimization), SEA (Search engine advertising), Facebook ads, flyers, other marketing campaigns and so on. But you always need to look at those KPIs CAC and CLV, because that could make the difference in the end if you make good money or not.
Of course, the above is also very important for B2B business, who for example have small and medium sized business as their customers and are winning their attention mainly online. But there are also B2B business models who work in a completely different way: e.g. hard and difficult to describe the own product, very big corporations as customers. That often results in very long sales cycle but when you are in the customer and won a new contract than you can often make millions with just one customer. But that also often means that you don’t have that standard product, instead you have to adjust everything a little to your exact customer needs.
In general, of course also CAC and CLV count here because if the CAC is too high your company will never be profitable or maybe you will never get a single customer. But often it is very hard to track those KPIs exactly down like when you have that subscription model. So, what are in this case maybe better KPIs to look at?
An important one could be the sales cycle duration. How long does it take from first customer contact until closing a deal? Every sales cycle could be tracked down into the following steps: Initiate Contact, Qualify Lead, Present offer, Overcome objections, Close deal. When you stuck too long at one step it could often be an indicator, that this is not an A customer but more a C or D customer (on which you should put less attention). With a good CRM-Tool it is very easy to track every step of the sales cycle down. And I would really put work into make guidelines for your special business model: how much effort you should put at every stage and what makes sense and then you should be able to better separate the wheat from the chaff.
For that very long sales cycles with big corporations you often did not get customers like with SEA or other ads. Often it happens through direct contacts so a good network is very important here or sometimes also cold calls need to be done. And you need a very long breathing and persistence.
I don’t want to make a marketing and sales guide out of this article, because I think if you google “How to make startup sales” or similar you find enough tools and techniques to start with. I just want to give a short overview in the following on what is available for free and what costs money to increase your startup sales activities.
- SEO (Search engine optimization): You can write a book about this topic to make it better. My experience is what helps very well is begin writing Blog articles and change your content from time to time. Dynamic and nice content is what nowadays really counts for Google and co. Think of which search terms your customers are typing to find you. And for every single search term you should create a blog post or other nice content. In the earlier years it was enough to create very simple backlinks (links to your homepage on other, often fake, websites) but that does not work anymore. What helps of course is when you achieve it to get a backlink on a very good ranked website, e.g. as a reference on your customer website when they are satisfied with what you offer.
- SEA (Search engine advertising) and Facebook ads: For some startups this is very important but could also get very expensive very soon. It highly depends on which area you are operating. In a niche you often get a click for a few cents but in a very competitive market (e.g. real estate or cars) one click is easily soon a few euros. In my opinion it helps with a small budget, like e.g. 5€ per day, to test a business model very fast if it would work or you need to change something.
- TV ads: That is something which is nothing for very early stage startups, rather it is something when you already have a good customer base and want to reach the early and late majority with your products. The costs are also very high but you get a huge range of new people addressed.
- Reviews: Nowadays reviews are very important. Lots of people look for reviews regardless if it is a restaurant to eat one-time or an online shop to buy new shoes or to find a barber in a new city. So personally, regardless of what kind of business I operate, I would put a lot of work into good reviews from my loyal customer base in the well-known platforms like Google, Facebook and other and that would help very well and is very sustainable.
The following is often very important if you are a local business like a Barber, Craftsmen, Restaurant or Bar.
- Reviews: Like above they are the basis of a well-running business.
- Word to mouth propaganda: Also, like the reviews, a very nice word to mouth propaganda from happy customers, who had a nice experience with your service, is the best what could happen to you. That is very well and sustainable for your business and I would put much on satisfied customers, because they are your best marketing machine.
- Offline Marketing activities: For example, if you are a restaurant than make some exclusive offers or sometimes a nice party, the same if you are a barber: who says that you cannot make a party with your nice customers? Today you need to contrast yourself from the normal services you offer. The people nowadays want to buy experiences and not just services.
- Local newspapers: Depending on the customers you have it could be also very helpful to inform local people in the local newspapers about your special activities and new services you offer. Otherwise how would the local people know what you are organize and offer?
You have more ideas that need to be mentioned here? I would happy to hear your thoughts!
Hopefully the post was interesting for you and you enjoyed reading it! Have a great time until the next post will be published next month and enjoy hustling, relaxing, chilling, sporting, travelling or whatever you plan to do!
All the best – Mo ❤
P.S.: If you have questions, suggestions, criticism, an idea for a great new topic or just want to have a cup of coffee or a glass of wine or you want to work out with me please do not hesitate to contact me.