3 THINGS YOU MUST DO BEFORE APPLYING FOR BUSINESS FINANCE Funding and Business Growth Playbook T: 0330 350 3356 @: hello@GrowingYourNumbers.com www: growingyournumbers.com
Customers Acquired and Customers Lost This Year vs Last Year
Only by looking at both New Customer Acquisition and Customer Retention, or Customer Attrition do we get to see the whole picture. Alex ’s Software Company retained 51.1% of their customer base, down from 55.2% the prior year so the Retention Rate year on year is negative.
New Customers Acquired = 79, minus Customers Lost = 92, which means Alex ’s business ended the period with 13 fewer customers than this time last year, so on the face of it the company is contracting.
As well as the retention rate as a percentage and the absolute number of customers acquired and lost, understanding the financial impact helps maintain focus on these two critical Business Growth Drivers.
Financial Impact of the Movement in Customers Acquired and Customers Lost This Year vs Last Year
We can never be sure exactly what the ‘Lost Customers’ might have purchased had they been retained, but taking the average purchase frequency and average purchase value into account, Alex ’s Software Company sold £44.6K less this year than last because of deteriorating Customer Retention.
Taking the reduction in New Customer Acquisition and Existing Customer Retention, Alex appears to have allowed as much as £153.3K to ‘slip between the cracks ’ .
At a 35% Gross Margin the potential profit impact on Alex ’s Software Business is £5 3.7K. That’s £53.7K less in the bank than might otherwise have been the case which could be critical.
There is a saying: Sales are Vanity, Profit is Sanity, but Cash is Reality. We have saved the best and most important to last, so let’s look at Cash.
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