Is my small business making enough profit?
February 5, 2015

How do you know if your small business is generating sufficient profits?

Basically, if your business is meeting your goals, then you are on your way to sustainability and generating sufficient profits.  As you created and executed your plan, then you were able to engage and find customers and generate revenue (money!).

If the plan is working, then that is fantastic and you should share your knowledge.

If the plan is still a work in progress, then there are some things to consider.  If you have customers (a major plus), but sales are weak (not enough money to support your goal), then it may be time to update your plan.

In order to grow your business (find ways to earn more money), then there are some tactics that will improve your Customer Lifetime Value (CLTV) or how much customers spend over time.

If you are not sure about your current CLTV, then check out this cool tool that will help figure out that number since it is very important.

The CLTV is important because it provides the “nuts and bolts” of running a business.  To create a successful and sustainable business, then you need to sell your product or service for more than it takes to produce it.  The production costs include how much money it takes to acquire customers (CAC) through marketing efforts, including advertising.

Now that we understand the foundations of profitability, to grow your business then you need to improve the CLTV or reduce the CAC.  Even with the annoying abbreviations, it is still easier said than done.

Receiptful produced a wonderful ebook called Keep Your Friends Close and Your Customers Closer to detail actions and steps to take to to identify your key customers and improve your relationship with them.

Industry-wide benchmarks shows that it costs about 5x more to acquire a new customer versus just retaining an existing customer (and maximizing the amount of money they thus spend with you over their lifetime).

Among the lessons learned, our favorite, which aligns with our message of engagement relates to customer service.


7 in 10 consumers are willing to spend up to 25% with companies that provide excellent customer service.

As a small business, then social media is an excellent tool for customer service.  In particular, if social media was the primary strategy to obtain and engage with potential customers, then it is the best method to provide customer service as well.

So as you look to grow your business, then remember to value your customers, which is always a good strategy.