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Marketing by the Numbers

6/29/2016

Two very important skills for entrepreneurs to master are marketing and finances.

Combine them by understanding the numbers behind marketing, and you have an even more powerful understanding of exactly what makes your business tick.

Key Numbers – Cost Per Client Acquisition

Do you know how much it costs your business to bring in one client? The technical term is “Cost per customer acquisition,” and it’s computed by adding the total marketing and sales costs excluding retention costs and dividing them by the total number of clients acquired during a period of time.

Cost per customer acquisition is important to know because then you can compute how long it takes before your business begins to make a profit on any one customer. In software application services with a monthly fee, the breakeven for a client can be around ten months.

It’s essential to understand this dynamic for pricing and volume planning purposes. If your services or products are priced too low so that your acquisition costs are not recouped in a reasonable period of time, it can play havoc with your cash flow as well as your profits. If you don’t have enough volume to cover overhead and acquisition costs, then your company will be in trouble in the long term.

Customer Lifetime Value

There is a simple and an academic formula for customer lifetime value. You can estimate it by multiplying the average sale of a customer by the average number of visits per year by the number of years they remain a customer. That’s the easy version.

The more difficult version of this formula takes into account retention rates and gross profit margins. The formula is: Average customer sales for life times the gross profit margin divided by the annual churn rate.

Once you know and track these numbers in your business, you’ll be better able to make smart decisions about your marketing investments and your pricing.

This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

Easy Ways to Ruin Your Credit Score

6/22/2016

Investor Warren Buffet once said, “It takes 20 years to build a reputation and five minutes to ruin it.”

The same maxim applies to good credit. Stellar credit scores don’t happen overnight or by accident. Instead, you have to exercise financial discipline, sometimes for years.

The reward: lenders who are willing to offer mortgages and car loans at favorable interest rates.

Unfortunately, like a good reputation, a strong credit score can easily be ruined. Here are three simple ways to devastate your credit score.

Max out your credit cards and continually fail to make required payments. Your credit score is a number, generally between 300 and 850 (worst to best), that lenders use when deciding whether to extend credit. About 35% of your credit score is based on your payment history. Paying late or paying less than required minimums can wreak havoc on your score and may signal to lenders that you’re overextended.

Cosign a loan for an irresponsible friend. There’s a reason your pal needs a cosigner – and it isn’t due to being a good credit risk. When you cosign for a loan, the status of the loan will appear on your credit report. Adding insult to injury, if your friend defaults, you’re responsible for the unpaid balance.

Close or open credit card accounts in quick succession. Either move can adversely affect the ratio of how much you owe in relation to your credit limits. As this ratio climbs, your credit score will tend to sink. Say, for example, you have three credit cards and each has a $1,000 limit. You carry a balance of $500 on one of those accounts. That’s a credit utilization ratio of $500 to $3,000 or about 17%. If you close one of the accounts, the ratio will jump to 25% ($500/$2,000). Though you haven’t accumulated more debt, your credit score may be hurt.

Be careful with your credit. Negative events can impact your rating for a long time, making lenders reluctant to offer you money.

This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

How to Respond to an IRS Notice

6/16/2016

Receiving a notice from the IRS can feel very stressful. However, there are steps you can take to limit the impact on you and your business.

If you find yourself on the IRS mailing list, here’s what to do:

Scan the heading. The first line, generally printed in bold type and centered beneath your name and address, will tell you why the IRS is contacting you. Questions about missing information, additional taxes

owed, or payments due mean you’ll want to take prompt action to avoid more notices or the assessment of interest and penalties.

Review the discrepancy. You’ll find the tax form and the year to which the notice applies printed in the upper right corner. Pull out your copy of the corresponding tax return, along with the supporting documents, and compare what you filed with what the IRS is questioning.
Prepare your explanation. Are the proposed changes correct? Did the IRS misapply a payment? Whatever the issue, there’s usually no need to file an amended return. However, the IRS typically wants a response, either by phone or mail, in order to clear the notice from your account.
Do not delay. Ignoring IRS correspondence will not make it go away. Reply to the IRS in a timely manner even if you don’t have all the information being requested.

Please contact your CPAif you receive a notice from the IRS, or your state or local taxing authority. They will set your mind at ease by helping you resolve the matter as quickly as possible.

This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

Marketing by the Numbers

Easy Ways to Ruin Your Credit Score

How to Respond to an IRS Notice

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﻿Marketing by the Numbers﻿

Easy Ways to Ruin Your Credit Score

﻿How to Respond to an IRS Notice

Author

Archives

Categories

Marketing by the Numbers

How to Respond to an IRS Notice