We set a sales and profit goal recently for one of our new services - get 500 new clients within the next year.  So I wanted to see what this would cost and how much profit this would bring in for us.  Using some base numbers, this is what I found:

Revenue and Profit Numbers

• Initial Setup Fee - $195
• Average Monthly Revenue per Client - $45
• Average Yearly Revenue per Client - $540
• Gross Margin - 80%

This is a pretty conservative number for our client revenues.  The goal is to increase to increase this number as we get more clients by improving the product we have and by adding on new services to what we offer.  But $45 a month is a fair number based on some past results of what we’ve seen.

Sale Numbers

• Lead to Sales Conversion Rate - 13%
• Sales Generation Cost - $400.00
• Lead Generation Cost - $50.00

Right now, our lead to sales conversion ratio is about 1 in 10, but there are some changes in place that will make that more like 1 in 8, so I used that number.  Some of our initial lead generation efforts has given us a lead generation cost of about $50.  That number should also decrease as we continue making improvements but it’s a good number to start with.

How We’ll Make $329,500 Next Year from These New Clients

This is a picture of what type of profit we’d make at different levels of new clients.  In the first year, we wouldn’t make a lot of money because we have to put a lot of money into acquiring new clients.  In fact, we might not make anything if some of our conversion rates and costs aren’t at the level that we are aiming to reach.  This does show us a few things to now that we’re going in the right direction:

• Even if we only get to 50% of what we hoped to reach, we’ll still make $164,750 in new profit next year.  That’s split between our ownership team since all other costs of running our business are taken care of already or are baked in as gross margin
• If we increase our revenue per month (which is another big goal of ours), we could make significantly more money

Do I Think We’ll Get Here?

Maybe, maybe not.  The fact is that my biggest concern is really the size of the market for this product.  As you can see from the chart above, we would have to generate at least 8,000 leads to get 1,000 new clients.  I think that is overly ambitious because the market we’re going after isn’t big enough to make that an easily attainable number.

I would also like to see us get more profit in the first year but that’s just the reality of spending a lot of money to get a lot of new clients.  I do know that we would never get to this level of new clients without spending money.  Word-of-mouth, referrals, and other types of free advertising will get us some clients but nowhere near the goal of 500 new clients we have for this product.