It can be really tough to get started in the B2B world — earning your first customer is so much harder when you’re offering an expensive service instead of cheap products — so a B2B company could be forgiven for reaching a point of stability and wanting to stay there.
Suppose you’ve managed that, though: don’t you aspire to achieve more? Surely you don’t want to stick with the same small pool of customers indefinitely, only ever looking for new clients to replace the old ones. It isn’t particularly exciting, and you could be wasting a huge amount of potential. If the opportunity comes along, and the time is right, you should try scaling.
Scaling just involves expanding your business to serve more customers, sell more products and/or services, and bring in more revenue. It’s a risk, sure, but one that’s absolutely worth it — you just need to know when that right time arrives. How do you manage that? You track your metrics. Here are some key metrics that tell you when it’s time to scale:
Customer acquisition cost
As noted in the opening, earning your first B2B client is difficult, and likely to be quite expensive. After all, you probably have no great track record of success to point to, or rousing endorsements to attest to your efficacy, and you certainly don’t have a brand name that can bring you the benefit of the doubt.
Over time, though, the amount it costs to find, convince and convert a new prospect will come down. This is your customer acquisition cost, encompassing everything you spend on marketing and sales for the average client. It’s tricky to get too fixated on the exact average, because the size of your clients can presumably vary quite significantly and a lower cost is only good if the standard of the average client stays the same or gets better.
Consequently, I suggest factoring in the size and significance of each client. When you feel confident that you’re able to make a successful pitch to a prospective client while sticking to a modest budget, that’s an excellent sign that you’re ready to scale.
Customer retention rate
Some businesses that have been around for decades still work with their very first clients. For the most part, that’s a great sign that they’ve managed to keep them happy for so long. Ahead of scaling, there’s a lot of value in reviewing your client lineup and thinking about how long you typically manage to retain a client. A few months? A year? Longer?
Here’s why this is an issue: if you have a high churn rate (ProfitWell has a great churn calculator), seeing clients leave on a regular basis and needing to win new clients to replace them, then your attention will always need to go towards maintaining what you already have. Trying to grow in that scenario is risky. What happens if you put time towards courting bigger clients, only to see your client base dwindle to a dangerous level as a result of your split focus?
If you’re extremely confident that every client you have today is going to stick with you for the coming year, then you can take the risk of scaling, knowing that you’ll still have clients backing you if it doesn’t work out and you need to scale back down.
Unused office hours
This isn’t something you’d track using Google Analytics, but it’s extremely useful because of what it means for your day-to-day operations. If you have enough clients to not only stay afloat but actually turn a profit, and you’re finding that you and/or your employees have free office hours, that means there’s clearly room for growth.
Look at it this way: without technically advancing any money (only the value of your time), you can fill those hours with efforts to build up your sales pipeline ready for a full-blown scaling effort. And when you have some prospects lined up, you can put your time into preparing some impressive pitches.
That isn’t enough for scaling, of course, because you’ll need an expanded operation to accommodate the growth — but if you have the right foundation beneath you (e.g. a scalable CMS with suitable features like the Shopify B2B platform), then it should just be a matter of being prepared to see your bills go up with your systems all seeing an increase in use.
Marketing originated customers
If you haven’t heard the term used before, marketing originated customers are those customers who ultimately hired you because of your marketing work. This is something for which you’ll need a carefully-configured analytics funnel — if you can’t suitably attribute your qualified leads to specific sources, you can’t use this metric.
This matter so much here because it indicates the efficacy of your marketing activity. If you’re going to scale, you’ll need to expand your marketing and win over numerous new clients, and if this metric shows that almost none of your customers come through your marketing, it should get you to stop and reconsider.
After all, if your clients are mostly coming through referrals, it’ll be extremely hard to grow your operation with any haste. Build up your marketing, train your sales staff, get things running optimally, and confirm that they’re yielding results — that’s a good jumping-off point.
Each of these metrics is useful for gauging how ready you are to scale. If you use them all, you should be able to get a very clear notion of what you should do. Good luck!
Rodney Laws
Latest posts by Rodney Laws (see all)
- Is Language the Most Important Factor In Building Customer Connections? - October 6, 2021
- 3 Reasons Why You Should Sell Through the Main Online Marketplaces - April 7, 2021
- Key Metrics That Tell You It’s Time To Scale Your B2B Business - September 4, 2019