Only $5 per customer per year
That’s what Facebook makes according to a recent article at TechnologyReview.com
“The company’s (Facebook) revenue amounts to a pitiful $5 per customer per year, which puts it ahead of the Huffington Post but somewhat behind the New York Times’ digital business.”
Now, you might think “Dude, I would love to have a business with 900 million people brining me 5 bucks a year”.
And I admit the total revenue number doesn’t suck.
But here’s the problem in a nutshell…
If you only make $5 per year per person, you can’t spend very much to get a new customer!
If they spend more than $5 to get a new customer, bye-bye profits.
So what’s the lesson here?
Know your numbers!
Here are the two most important metrics to growing your business:
1. Cost Per Acquisition
2. Lifetime Customer Value
These numbers tell you what you can spend to get new clients/customers.
Lifetime Customer Value (LCV) is how much on average each of your clients/customers buy from you. This would include sessions, CD’s, DVD’s, training courses, coaching, etc.
Cost Per Acquisition (CPA) is how much on average you spend to get a new paying client/customer.
So if LCV = $500 and your CPA = $45, you have a profit machine running!
But here’s where a true renegade thinking comes into play.
You could raise your Cost Per Acquisition up to $400 and still make on average $100 on each new client or customer.
By increasing your spend on new leads you can rapidly build your business.
This is the exact OPPOSITE of what most people do.
Because people operate from fear of loss instead of what the numbers are saying.
The difference in this strategy is deliberately spending MORE on your marketing vs trying to be cheap.
Ultimately you want to be able to outspend your competition.
Which ironically, Facebook can’t do even though it’s a multi-billion dollar company.