One metric that every business should know is the cost to gain a new customer. This is important because it lets you determine if your marketing efforts are cost-effective or if they need to be changed. It can also let you know if you can lower (or need to increase) your prices based on the cost of making that sale.

To calculate the cost per customer, you will need to know exactly how much you spend on sales and marketing (preferably by source) and how many new and returning customers you get from each source. For example, if you spend $500 on per-click advertising and get 25 new customers and 25 returning customers (ask them during checkout how they heard of you), then your cost per customer is $10. This is great if you make an average profit of $1,000 per customer, not so good if the average profit per customer is $5.

Keeping track of cost per customer by marketing source will help you manage your marketing budget and focus your resources on the avenues that will give you the best bang for your buck!

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