Tips & Talk 88 – How Many Customers Do You Need?

How many customers you really need to reach your sales goals? Knowing this can help guide your sales activities and reduce the overwhelm that comes with ambiguity – not knowing where you’ll find people to buy your products and leaving things up to chance.

This number is also the basis for gaining confidence because you understand and can put in place various ways to get the number of customers you need. As an added bonus, it also may prompt you to relook at your pricing, production, staffing and even materials.

My goal here is to help you figure out your own unique customer number.

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Transcript
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Hi there.

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It's Sue and thanks for joining me for Tips and Talk

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Day. These are bite sized topics that I pull from community

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questions and things that I'm observing in the world of handmade

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small business.

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DME over on Instagram at Gift Biz Unwrapped.

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How many customers do you really need to reach your sales

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goals? Have you ever thought about it much less calculated it

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out for your specific products?

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Knowing this number can help guide your sales activities and reduce

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the overwhelm that comes with ambiguity,

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not knowing where you'll find people to buy your products and

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simply leaving things up to chance.

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This number is also the basis for gaining confidence in your

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business performance because you can understand and put in place various

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ways to get the number of customers that you need.

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As an added bonus,

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it may prompt you to re-look at your pricing,

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production, staffing,

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and even materials.

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My goal today is to help you figure out your own

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target customer number.

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It of course,

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varies by the product that you sell and your goals,

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so your required customer number can and most likely will be

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different from all the others.

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I've created two scenarios to demonstrate how to determine your number.

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I'm sure you'll be able to apply these examples to your

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own situation and figure out your own desired customer count.

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To begin with,

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I've made a couple of assumptions.

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First off,

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you've priced your products properly,

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so you've covered all of your costs and include margin.

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Second, I'm treating each sale as a single customer,

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so if someone buys from you twice in a year,

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it's calculated as two customers.

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Third, we're focusing here on retail.

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In other words,

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direct to consumer sales versus wholesale.

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Four, for this calculation,

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choose your best selling product.

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This will give you the most accurate ending number and one

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you can feel confident with taking action on five.

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All the calculations are set to the goal of $10,000

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in revenue a year.

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I chose this number because it's an easy one to multiply

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out based on your actual financial goals,

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and finally,

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keep in mind that this is an overall revenue number,

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not profit.

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Again, for ease of analysis.

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All right,

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here's scenario number one.

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The product is table runners.

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I picked this product because it's more likely a one-off sale

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versus a product that needs to be replenished.

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That's gonna come in our second scenario.

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What you're going to see demonstrated here is the difference in

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customer count as a price changes resourcing.

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Etsy, I found that custom made table runners go for anywhere

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from 15 to $50.

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Let's look at both price points.

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Dividing $10,000

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by your sale price,

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you would need to sell 667 runners at $15 and 200

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runners at $50,

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breaking that down into months.

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On average,

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you would need to sell 56 runners at $15 and only

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17 at $50 each month.

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Major difference,

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isn't it?

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Again, we're working here with an annual number of $10,000

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in revenue,

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so you'd multiply these numbers to match your annual goal.

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If your target was $50,000,

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for example,

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you'd multiply your number by five and so on.

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Having these numbers gives you a single product purchase customer count

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to reach.

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Another consideration that would lower your number is knowing what percentage

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of your customers buy,

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again, are repeat customers.

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In this case,

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maybe a certain number of customers want new runners for every

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season, or they buy products for gifts,

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things like that.

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This is one of the benefits of staying in touch with

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past customers,

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like sending emails to remind them about your products and trigger

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new sales.

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You'll note that in this scenario,

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the number of customers required is dramatically different based on your

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price. I mean,

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667 versus 200 is a lot,

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and remember,

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each sale comes with other time considerations over production too,

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like packaging,

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shipping, customer service interactions.

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Recently in podcast episode 393,

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we talked about how strategically pricing your product has ramifications throughout

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your whole process.

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It's actually a good one to listen to for a detailed

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pricing discussion overall.

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Now, let's look at scenario number two.

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The product I've chosen here is handmade soap at a $7

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and 50 cent price point,

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calculating the same way we did for table runners.

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At $10,000

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annual revenue,

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you would need to sell 1,333

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bars of soap or 444 each month,

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but hold on for products like soap candles,

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essential oils,

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bakery items,

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spices, and maybe yours,

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a single customer doesn't buy just one.

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For our soaps here,

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let's say that for most orders,

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people buy three at a time.

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That drops your customer count to only 111 for the year

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or 37 a month.

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Am I opening your eyes here?

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37 customers a month?

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Gosh, that could easily be one craft show day.

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Of course,

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I know you sell a variety of items.

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Some months sales are stronger than others and some customer purchases

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will be more or less than your averages,

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but running your calculation,

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as I've just described,

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will give you a realistic average number to work with.

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Now, what do you do with this customer count?

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It's time to put a plan in place on how you'll

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attract these customers already.

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Have a plan.

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Compare this customer count number to the results that you're seeing

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with your current plan and make adjustments accordingly.

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Incorporating multiple ways that people can purchase from you will significantly

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push your sales in your favor.

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You don't need to do all the things I'm gonna list

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right here,

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especially if you're just starting out,

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but having your own website,

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selling through a Etsy shop,

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attending in person shows,

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promoting on social media,

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sending emails.

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All of these are some of the major streams.

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Revenue comes into your business.

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I know dealing with numbers isn't the most fun activity.

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I know it isn't for me,

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but having a grasp on what's required to hit your sales

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targets, gives you direction on ensuring that that will happen.

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It's the difference between hoping you'll get sales and new customers

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versus seeing it play out in real life.

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That's a wrap.

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I'm a get to the point kind of girl,

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and this is what you can expect from these quick midweek

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sessions. Now it's your turn.

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Go out and fulfill that dream of yours.

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Share your handmade products with us.

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We want them,

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and they bring us both.

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