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How to do a simple customer profitability analysis

How to do a simple customer profitability analysis

Maintaining a healthy business and avoiding stress is key.
When was the last time that you reviewed your customer list? There are two goals: Identify customers that waste your time but don’t bring enough profit. Two goals are involved: Identify customers who waste your time and don’t bring in enough profit
If you had more time, identify customers that could bring you more profits
You don’t have to try to please your “bad” customers once you identify them. You can instead spend your time more productively, such as chasing new clients. I have 15+ years of experience in marketing teams. You must also consider qualitative KPIs. For example, a customer might pay well (good quantitative KPI), but be so difficult to work for (bad qualitative KPI), that it is difficult to keep your employees. This could cause your business to lose money in recruitment. While a startup customer may not be profitable right now, once they succeed, you’ll regret it.
The first step in customer profitability analysis is to calculate the profit percentage and profit margin per customer. Next, subtract amortized fixed cost (office, taxes and lease, etc.) You can also use variable costs (the amount of time you worked) to calculate the customer profit margin. Plotly or Excel can be used to calculate customer profitability. You should take into account every hour spent with a customer, even those that are not billable. ActiveCollab’s Time Report will give you the total value for all your time records for each customer. You can then run the Invoices report to see how much each customer earned. This bookmarklet will allow you to calculate the time spent by each customer. To calculate the profit share per customer, divide the customer profit by the total profit and multiply it by 100%. This will help you identify your biggest liabilities so that you can better manage risk. You’re in serious trouble if a customer accounts for 60% of your earnings. This is because you will spend so much time serving them that you won’t have time to find other customers or diversify risk. Because the customer has all the bargaining power, you might have to make poor business decisions. Customers know this and will use their power to make poor business decisions. One common reason is “they’re my A list customer that gives me leverage in dealing with media.” You can’t ignore them all. But, in the end, they are all excuses. Diversify your customer base and focus on bringing in new, more profitable customers rather than letting existing customers impose tight deadlines and make it difficult to pay your rates. Stable and healthy cash-flow is the lifeblood of every business.Profitability Analysis: Qualitative KPIs
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