A recent post on the CFO Journal blog by the Wall Street Journal by the CFO (Sam Funk) of Clearlink (an online customer-headhunter for the telecommunications, insurance and other industries) illustrates the dangers of relying on averages and totals to grow a small business more effectively.
Here are some insightful excerpts from the post:
“Getting customers is the goal, but knowing how much they cost to acquire is the key.”
“’I spend most of my time from a CFO perspective knowing how much those customers cost,’ [Funk] told CFO Journal.”
“Some customers are more valuable than others, and CFOs need to know which are the most profitable to target.”
“Depending on the service, and geographic or income demographics, some customers will be more profitable than others…. It is a mistake to blend those numbers. The difference… is in the profit margin, as some customers are more valuable….”
“Averages are meaningless,” he says. Rather, he asks if CFOs know “the cost of a customer group.”