What marketing did you do last year that really WORKED?
- Do you take the time every January to evaluate your business the previous year?
- Do you know where your customers come from?
- What did you do to acquire them?
- Which referral type has the highest Net Profit?
- What information did I learn from last year that I can use to improve this year?
Every January, I take the time to go through my accounting software and see what worked and what did not. I can then make this year’s changes based on facts from the previous year.
Allow me to share this process with you to decide if you want to do this for your business if you are not already.
How did your customers find you?
This is the question I ask EVERY new customer. For me, it is in the first conversation. I straight-out ask, “How did you find me?”. I then record that answer in my accounting software file for that customer. I want to know what business generating activities I am doing that are working. If something is not working, I stop doing that activity and do more of the top-producing activity. Here are the activities that I am tracking (you might have different ones):
- Networking: this can be Online or in person. These are things like networking groups, chamber events, association meetings, and something that I do in the community that puts me in front of general people.
- Referrals are direct referrals from customers or other people I know.
- Internet: My website, search engine optimization, Online listings, reviews, etc. Any activity on the Internet.
- Social Media: I separated this from the Internet because it has its own set of activities. This is time and interaction on any social media platform.
- Existing Customers: for me, these are existing customers who want a refresh of their website that I already created in the past. They can also be existing customers that want a different website.
Looking at the pie chart above, you can see that Networking is the winner for how my customers found me in 2021.
- Networking 40%
- Referrals 30%
- Internet 25%
- Existing Customers 4%
- Social Media 1%
Looking at these numbers, one might think I could drop existing customers (I would NEVER do that) and social media. But this is not the whole picture. Let’s look at a few more data items.
What Networking worked?
The pie chart below clarifies what networking groups I need to continue. But here is the MAGIC of networking, some of these groups I have not actively participated in for years. Here is the breakdown:
- WPN (Women’s Prosperity Network): is an Online networking group. Members are primarily self-employed women looking to meet other businesses. 2021 was my first full year with this group. It is one I highly recommend and will continue for 2022.
- ITTL (I Take The Lead): This started as a local networking group that has moved Online due to COVID. I have been with this group for over 16 years. I speak at meetings for this group and will continue for 2022.
- General Networking: this is the bucket of networking that is usually one-offs. This could be random chamber meetings, associations that I am not a member of, meetings that I went to once and did not pursue whatever reason. In fact, one of these people was a person I sat next to on an airplane about seven years ago. At 7%, I can afford to drop these things. This would allow me more time for higher percentage networking.
- DIY: This is a group that I was a member of for years, but I am no longer a member. The 2% was from past activity.
- CCLD: This is another group that I was a member of for years. When COVID hit, they mostly disbanded. The 2% is from past activity.
- A Wedding Group: This was a local wedding association that I would speak at once a year. They are no longer together, and I have not been associated with them for over three years. I was never a member, just a guest speaker. This group produced a long-term client that happens to be one of my favorite officiants.
- A Local Networking Group: This local networking group is no longer together. I was a member over five years ago for about one year.
- An Urban Group: This local networking group is no more. I spoke at this group over ten years ago and magically created a website this year from a direct referral from that group.
As you can see, looking at the breakdown of my largest source of income can give more insights. But this is still not the whole picture. What did it COST me for each of these referral types?
What did each Referral Type cost me?
What did it cost me to gain a client?
This question needs answering before a final decision can be made on what type of marketing is working for my business. I can get expense information from my accounting software and assign the costs to a referral category. Some expenses are directly associated with one category, like networking group fees. Other expenses are overhead and apply to all types. For this, I got my overhead total, took the percentage of each referral category, and allocated the correct portion of that expense. See the chart below.
What is the Net Profit for each Referral Type?
Which referral type is the most profitable?
The highest income is from the Networking group generating 40% of the revenue, but it came with a price tag of the highest cost of 43%. From the chart below the net profit for the Networking group is 36%. It is my highest net profit.
Direct Referrals was a close second at a net profit of 35% and Internet was third at 22% net profit.
These three referral types combined make up 93% of my net profit of my business.
- I need to get my accounting software set up to give me all this information for 2022. For these numbers I had to export to Excel and add calculation formulas which took a lot of time. Spending time now on reorganizing my account software will save time in the future.
- What do I need to do this year to increase my number of direct referrals from existing customers and other business owners I know?
- What can I do to decrease the expenses for Networking but not sacrifice my referrals from networking?
- One more thing I need to do is determine the income per transaction per referral.
When analyzing all my referral types I realized that some referral types are more profitable than others, but none of them lost me money. I need all of these referral types to have a complete business.