Let's Talk About Numbers

4 key stats that tell you whether your marketing is working

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Hiya,

How do feel about numbers and business? Do you know yours? Are you on top of your conversion rate and customer acquisition cost?

If that numbers stuff is confusing to you, this issue of the newsletter is for you.

The edition in a nutshell:

  • Why numbers matter in your business

  • 4 key marketing numbers you need to know and understand

  • How these numbers affect your quality of life

Let’s get into it.

Hustling or Vibes? Nope, Structure First!

Story time!

Last week, I talked to my friend C. who’s a consultant. It’s interesting to chat with her, because she works with a lot of big companies while what I do is for solo and small businesses.

Often, our professional worlds are far apart (which makes our conversations fun). Sometimes, they surprisingly overlap.

Last week, I was fresh off attending an online conference on marketing and found myself ranting to my friend. The conference was great, but it hit me yet again how there’s a divide between solo business and the rest of the business world.

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It seems to me that the solopreneur space treats a lot of the “business stuff” like it doesn’t apply to them. While I don’t think you need to run your one-person-shop like a corporation, the lack of proper business education in this sector really infuriates me - time and again, as my friends can tell you from my countless rants about this.

When you’re a solo business, somehow, everything sound goes out the window and instead you're either crushing it hustling or are feeling out the energies of Pluto square Neptune in Cancer before making a purchase. A lot of this is infantilizing to me, when you never teach people the foundations to understand business, so they can make things happen for themselves. I hate this.

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Both of these extremes are doing solopreneurs a disservice, because they don’t create healthy foundations for any business. Intuition and hustle are personal choices when it comes to execution. Below that you need a foundation.

I also understand that a lot of solopreneurs come into entrepreneurship through coincidence (their IG took off), passion, creativity, or the need to figure out a path to an income. In that case, you do your best to make it work. I get that. I did that, too.

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Especially if you’ve taken the organic path to entrepreneurship, anything that’s remotely business sounding can be intimidating. I’ve seen people create a ton of beliefs around this because of this feeling. For example: “I’m not like those gray numbers people”, “that just takes the soul from my work”, or “I will not commodify my creative impulses”. I definitely did that in the past.

All this is valid. Still, to get to a point where you’re not floundering or flying by the seams of your pants, but take control of this one precious life you’re living, it helps to get cozy with some of the numbers and business stuff.

I’ll keep revisiting this topic to introduce you to key numbers and concepts from big business to look out for in your solo business.

Marketing Numbers You Need to Know

1) Conversion Rate

Do you know how effective your content or your offers are? The conversion rate tells you that.

Conversion Rate: Number of Conversions / Total Interactions.

You can use the conversion rate for conversions on your offers but also on things like newsletter sign-ups.

An example:

  • You’re an SEO and market your service through content marketing

  • Out of 1,000 people who see your site, 1 books an SEO service package

  • Your conversion rate is 1/1000 = 0.1%

What it tells you:
The conversion rate tells you how effective what you’re doing is. If all you do is make content without any conversions, you’re wasting your time.

It can also give you a hint on what you need to do to grow your business. If the SEO converts 1 out of 1,000 people looking at their site, to get another customer they need to either a) find 1,000 other people to look at their site for a conversion OR b) figure out a way to double their conversion from 1.

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2) Customer Acquisition Cost (CAC)

How much do you have to invest before somebody becomes your customer in your business, overall?

CAC = Total Spend on Marketing & Sales / New Customers Acquired

An example:

  • You’re the SEO from above again.

  • You charge 80€/hr for client work

  • Marketing takes you 5hrs/week, so costs you 1,600€/month

  • You acquire 2 customers per month from your content

  • Your CAC is 1,600€/2 = 800.

  • Each of these customers has cost you 800€ to acquire.

Note: Of course, this is an imperfect calculation because you can’t bill your own work hours like that. At the same time, it shows the value of your time you need to invest to get two clients.

What it tells you:

How much you need to invest before somebody becomes a client. This is important to make sure you’re investing your time wisely when you market with content, for example. It’s also important to track this when you pay for ads.

A CAC of 800€ per customer sounds outrageous for a solopreneur.

If you find your CAC is too high, subjectively, you can either get faster at finding customers or find a way to do it for less. In the example above, you have three solutions:

  1. Overhaul your marketing strategy to make sure it’s as efficient as possible.

  2. Find ways to do your marketing faster, f.e. with AI.

  3. Outsource your marketing to somebody who can do it for less.

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3) Lifetime Value (LTV)

You calculate this to understand how much money a customer spends on you for how long ever they may be a customer of yours.

To calculate it, you need to take these two steps:

1. Customer Value = Average Purchase Value x Average Number of Purchases

2. Customer Lifetime Value = Customer Value x Average Customer Lifespan

An example:

Customer Value:

  • You (SEO consultant) work on a retainer basis. Every month, you charge your clients 1,000€ for an SEO services package.

  • Most clients work with you for 12 months on average. 12 is your average number of purchases because they pay for the retainer 12 times.

  • Customer Value = 1,000€ x 12 = 12,000€

Customer Lifetime Value:

  • Most of your clients don’t come back after those 12 months on average.

  • That means that your average customer lifespan is 1 for one year.

  • Customer Lifetime Value = 12,000 × 1 = 12,000 €

What it tells you:

LTV is important, because there’s a 50% chance (I’ve also seen 60%-70% online) existing customers will buy from you again. For new customers that’s between 5% to 20%. If your LTV is high, you’re doing a good job with customer retention. If it’s low, you might need to investigate what you can do to serve people for longer or for them to come back to buy from you.

LTV is also important when you look at it in relationship to CAC, see below.

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4) LTV to CAC Ratio

This is where it gets mega interesting. Only when you compare how much it costs you to get a customer vs. how much they’ll spend on you, can you get wise about whether your marketing is actually working.

How you calculate it: LTV/CAC, LTV divided by CAC.

An example:

  • Let’s look at the SEO again.

  • Your CAC was 800€ / customer. That sounded insane, right? 800€ invested to get one customer. Pff!

  • Your LTV is 12,000€ / customer.

When you look at those numbers, their LTV to CAC ratio is 12,000/800=15, 15:1.

What it tells you:

A LTV to CAC ratio of 15:1 is good! It means that for every 1€ you spend to acquire a customer, you can expect to make 15€ back.

Now imagine the numbers were different. What if it cost the SEO 800€ to attract clients who end up spending 2,000€ with them on average? You’re still making a profit. Considering that you also have to pay for your life, business expenses, rent, food, insurance, etc. this is not ideal. You either need to find a way to book clients who spend more with you on average OR lower the cost of getting a client. 400€ to 2,000€ looks a lot better.

If LTV to CAC is…:

  • below 1, it means you’re losing money. It costs you more to get a customer than you make from them. Avoid at all costs!

  • around 3, this is considered optimal in marketing

  • higher than 3, marketers say that it shows you might miss out on income and should spend more to attract new customers.

For a solo business, an LTV to CAC of greater than 3:1 might tell you to invest more to attract more customers. Unlike a big company, you also need to make sure you can handle more clients.

Maybe, the SEO from our example is already fully booked and doesn’t want to expand their business. Or, looking at their LTV to CAC, they realize that they have room to serve more people with their work and grow their business.

Marketing Numbers and Your Quality of Life

I’ve now lead you through four maybe overwhelming or boring-seeming calculations for marketing.

Why should all this business stuff matter to you?

Here’s why! These numbers tell you whether you’re

  • using your time wisely

  • doing enough to market your business (objectively!)

  • making the most of your opportunities

  • running a business or playing business

Knowing these numbers can mean free evenings and time for your family, life, and friends - or being stuck in a never-ending doomloop thinking you’re never doing enough. They also tell you where it makes sense to invest time and energy to improve things. They can back up or check your intuition. And, they can help you step away from doing, doing, doing for the sake of it.

From that perspective, these numbers don’t sound so bad, after all.

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For a solopreneur, I think it’s good to look at them on a monthly or quarterly basis. You don’t need to overdo it by obsessing over them week after week.

You should, however, have an idea whether you’re moving in the right direction and whether your efforts are paying off. Aside from smart business, it’s also an act of self love. Nobody would stay in a job where you work long hours or directionless with little payoff. Don’t do this to yourself as your own boss.

And if you feel this sounds good but a bit much for where you are, you can work through this with me in a 1:1 session.

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Aaaand, that’s it from me for today. You got this! Let me know if you found this helpful!

Happy Marketing,

Johanna 📣

PS: Writing this I felt like my high school math teacher, Mr. B., who always drew boxes around the formulas he was teaching us. :)

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