Join Frank on the road as he addresses Customer Acquisition Costs.  He breaks down how much each customer is costing you according to your advertisement dollars spent.  Frank also suggests keeping a tracking system of which advertising platform those customers are being acquired.

Frank:
Customer acquisition cost. What does a new customer costing you to acquire? Today in this podcast we’re gonna address that issue. 

Announcer:
Welcome to the Lawn Care Frank Podcast! Where we help lawn care professionals, like yourself, start and grow their business. By tackling obstacles such as finding customers, hiring talented people, spreading brand awareness, and much much more. And now your host…Lawn Care Frank

Frank:
What’s going on lawn care pros? Today we’re gonna talk about customer acquisition cost. So, I’m often asked what’s the best way to advertise my business. And everybody wants to know how do I get more customers? That’s really a loaded question because there’s so many different ways to advertise your business. You can advertise with brochures, you can do flyers, you can do postcards and business cards and you can do online marketing like Facebook ads, google ads, and you know like Nextdoor app. And it’s going to depend on the type of business that you have. So, it’s not a one way fits all kind of a thing. So, if I’m doing you know like postcards and that’s working for my business that might not necessarily work for you. Because you know I’ve actually heard many people say even online that you know “I tried E.D.D.M. and oh my god I spent all this money, and it was horrible. It didn’t do very well for me”. But I can, you know, tell you that E.D.D.M. works for a lot of different people, a lot of different businesses. So, you really gotta focus in on what’s best for your business. And so today we’re gonna dive in on something that’s going to help us determine what’s the best way to advertise for you for your business. And that’s figuring out what’s your customer acquisition cost. So, what that means is how much money am I spending in my business to acquire a customer? So that means, you know, if i go and do some postcards and it cost me $100 or $200 right? How many customers did I acquire when I spent that $100 or $200? Or even $1,000? You know did I spend $1,000 and acquire 5 customers? If I did that means that it costs me $200 to acquire each customer, right? So, is that a good cost? That’s what we want to kind of determine today. And again, that’s gonna kind of vary for your type of business as well. Because your customer acquisition cost might be a little bit higher if you’re doing a higher ticket item. But today we’re gonna talk about mowing and maintenance type of business, right? So if you’re doing mowing, you’re doing flower bed clean up, mulching, that kind of things. You now shrubs and all the other stuff that pertains to the maintenance side of business. Let’s dig in on that. So, if you have a customer and you know that they’re spending $2,000 a year with you and maybe that’s your average, right? So what is a good number to acquire that customer? Would you say that if I spent $100 to acquire a customer that is going to spend $2,000 in a year is that a good cost? I would say absolutely that’s a good cost, right? That’s a good amount for you to spend. So basically, we’re kind of reverse engineering in trying to figure out, you know, if I spend $100 is that worth $2,000 worth of revenue. And really that’s going to be determined in your type of business as well because you have to figure out, you know, that $2,000 annual revenue you know what’s my profit out of that? So, when I was doing mowing in our business our retention rate was around 96%, right? So that means that customer is gonna be with us the following year and our lifetime value of the customer obviously goes up from there, right? Because once you acquire a customer, you know, you are going to not have to spend any more money as far as advertisement goes with that customer. So if I spend $200 and you know they spend $2,000 with me on the first year another $2,000 the second year and so on and so forth and I know in my business the average lifetime value of a customer is you know x amount because the way I figured that out is I know that the lifetime average time as far as how long a customer is gonna stay with me whether that’s because they’re moving and relocating is 5 or 6 years right? So, if somebody is going to stay with you 5 or 6 years and they’re spending $2,000 a year they’re spending $12,000 you know $10,000 to $12,000 dollars throughout the whole life of that customer, right? With you. So, is it worth it for me to spend $100 to acquire that? Absolutely, right? So that’s what we want to figure out. We want to figure out in your business what’s that number? And the way you’re gonna do that. You already advertise, right? So, if you already advertise what I want you to do is to start really, you know, honing in on the numbers. I want you to every time you put out a flyer or you do E.D.D.M. or you spent money online. I want you to understand and know how much you’re spending, right? And then you also want to figure out how many customers did I acquire with that spend, right? And then you’re gonna go and chop that up even further, right? So if I spend x number of dollars with Google. I want to know how many customers that I acquired from Google. That’s why you have to track things. That’s why everybody says it’s so important to track things, right?  Because you don’t want to just put that in the pool, right? Cause if you do that you really don’t know, you know, is Google really working for me but the flyers are not? So if you do like E.D.D.M. and it costs you $1,000 to do E.D.D.M. and you acquire 2 customers, right?  You know that it costs you $500 to acquire that customer. But now you’re doing Google ads and you figure out that oh my god I spent the same amount I spent $1,000 and I acquired, you know, 10 customers. So, I’m spend $100 with Google. So now which is better, right? Obviously, Google in this case, in this scenario is gonna be better. But you have to find out for yourself what’s working for you as far as, you know, the different type of advertisements that you do. You know, business cards you put those out. You know how much it costs to, you know, print that and you also have to factor in how much did it cost me to distribute it? So, if you’re doing that yourself you’ve gotta kinda figure that out. Like what am I spending to you know put those on the doors and that kind of thing, so you have the labor side of it. Then you want to add the labor side to the cost of print then you have the total amount. Let’s say you spent $1,000 you did your business cards you got them out and you acquired 10 new customers from that. So our acquisition cost per customer is $100. So that’s probably a really good deal especially if you know they are going to stay with you a long time. That which you know really depends on your on how well you treat the customer, how well your job is. So, on the flip side of things if you’re spending $1,000 on the same marketing and you only acquire let’s say 2 customers then that’s a $500 per customer acquisition cost and I can tell you from experience when it comes to the maintenance side of things that definitely is not a very good cost of acquisition. You don’t want to spend that $500 to acquire that customer because it’s the number is much much lower. And it’s going to vary one business to another. I can tell you $500 is definitely not the right number. So, you’re really gonna have to figure out what that number is for your business, and you know what you feel comfortable with as far as what you’re spending. I can tell you from experience as far as when I was mowing my customer acquisition cost was under $100. So, I pretty much knew that I’m going to spend $100 or less to acquire each new customer. And that’s kind of something that you want to keep in mind and kind of hone in on and see where your customer acquisition cost is. And let’s see if we can get that price down for you too. So, the next question might be, you know, how do I figure out, you know, where the customers are coming from? So you obviously want to track them and the best way as I’ve found as far as tracking goes is when somebody calls in we always ask you know “how did you hear about us” and they’ll tell you “I got you through the money mailer” or “it was Google” and as far as online advertisement goes there’s ways to track that as well. But again, the simplest way is asking. And when you do that, you want to put that into your system, so you know where those customers came from. Now the system as far as tracking it could be as simple as an excel sheet or if you have a CRM or if you’re using Yardbooks or RealGreen System or whatever type of system using you can track it within that system. But again, if you’re not using that kind of system, you can do it as simple as an excel spreadsheet. I hope this information was helpful for you today. I look forward to visiting with you in future podcasts. See you next time lawn care pros!

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