Have you ever wondered just how many clients your business really needs? You might be thinking “as many as I can get!” but by ignoring the actual numbers, you could be doing yourself a huge disservice.
To know if your marketing is successful, whether you need to do more — or can get away with doing less — you need data. And to know if your business is healthy and successful, you need firm goals.
Going through the following process will also allow you to see if you need to change the way you offer your services.
So, let’s dig in (the math isn’t too scary, I promise!).
I suggest you do the numbers based on your yearly figures if you can. That way, if there is seasonal variation in your client numbers it’s easier to see how many you need in busy times to make up for shortfall during quieter times.
Step 1: Calculate your expenses
Start with your business expenses. This will tell you how much you need to earn to keep your business functioning. Go through your accounts and pull out all recurring and annual payments.
- Rent and utilities for business premises
- Vehicle costs
- Website and marketing costs
- Employee wages and uniforms
- Insurance and taxes
- Equipment and supplies (treats, agility, etc.)
- Any other subscriptions and expenses
Next, list all your living expenses, i.e., how much you need to meet your basic living costs. (I’ve separated these out into business and non-business expenses to help you brainstorm all your unavoidable costs — but these are all the expenses that need to be covered.)
- Rent/mortgage and utilities for your home
- Food, clothes, etc.
- Personal telephone and vehicle
- Health care (human and animal)
- Personal taxes
Now add these together to calculate total expenses for the year. This is the bare minimum you need to survive. So your total expenses = your survival revenue goal.
Step 2: Establish your ideal income goal
How much would you like to make on top of your survival amount?
This is your “nice to have” amount that would give you some wiggle room if unexpected bills crop up and allow you to squirrel some savings away.
We’ll call this your bonus.
Your ideal revenue goal = total expenses + bonus.
Don’t forget to include taxes (including income tax) in all your calculations!
Your actual income needs to fall somewhere between your survival goal and your ideal goal. The closer to your ideal revenue goal you are, the healthier your bank balance will be!
Step 3: Determine what your current clients are worth
Next you need to work out how much your clients are worth. If you’re anything like most dog trainers, you probably sell a mix of private session packages and group classes. Let’s work out how much revenue those different client types bring in.
Private client packages
Let’s say you sell three tiers of packages, A, B, and C. To find the average value per package sold you need to estimate the percentage sold of each package. Look back over your last quarter and note how many of each you sold. (If you have seasonal fluctuations, check the previous year if you can.)
Imagine you sold 10 packages in the last quarter. They break down like this:
Package A, costs $500. Sold 5 (50% of all package sales)
Package B, costs $750. Sold 3 (30% of all package sales)
Package C, costs $1000. Sold 2 (20% of all package sales)
Because you didn’t sell the same number of each package, you need to find the weighted average:
Weighted Average = (Value of Package A x Percentage of Sales for Package A) + (Value of Package B x Percentage of Sales for Package B) + (Value of Package C x Percentage of Sales for Package C)
Then plug the values into the formula:
Weighted Average = ($500 x 0.50) + ($750 x 0.30) + ($1000 x 0.20) = $250 + $225 + $200 = $675
So, the average value of a private 1:1 client = $675
You also hold group classes. These cost each client $120 per block.
Value of a group class client = $120
Step 4: Calculate how many private vs class clients you take
First, what’s the ratio of private lessons to group classes that you typically manage per week?
Let’s assume the maximum number of private sessions you can do is 20 per week. And let’s also assume the maximum number of group classes you can hold is 10 per week.
The ratio of private client hours to group class hours = 2:1
Step 5: Determine how many clients you need to survive
Let’s ignore the fact that some clients may repeat classes or purchase additional packages to keep things simple.
Assuming your survival income amount is $50,000, and your ratio is two private client hours to one group class hour per week:
The private client income needed = $50,000 x 2/3 = $33,333
If private clients are worth $675 each (average), then the number of clients needed = $33,333 / $675 = 50 private clients per year.
The group class income needed = $50,000 x 1/3 = $16,666
If group class clients are worth $120 each, then the number of clients needed = $16,666 / $120 = 139 group class clients per year.
Step 6: Determine how many clients you need for your ideal income goal
To find out how many clients you need for this, just run the numbers again. Let’s assume your ideal goal income is $75,000:
The private client income needed = $75,000 x 2/3 = $50,000
If Private clients are worth $675 each (average), then the number of clients needed = $50,000 / $675 = 74 private clients in a year.
The group class income needed = $75,000 * 1/3 = $25,000
If group class clients are worth $120 each, then the number of clients needed = $25,000 / $120 = 209 group class clients per year.
I hate numbers! Why bother?
Good question! Well, if you know your business numbers you can do all sorts of fancy things.
- Plan your work hours strategically. Is it more efficient to do more classes or private clients?
- Answer logistics questions about how you run classes. For example, can you physically get the required number of clients into your current class structure? Or do you need to change your class size, or the number of weeks a class runs for? If you know how many class clients you need (and your income goal for classes) you can either adjust the number of weeks, the number of people, or the price of each class.
- Work out whether your packages are working for you. Can you physically service the number of clients you need to meet your income goals? Are there actually enough billable hours allocated to private clients to meet your goals? Or do you need to adjust the number of sessions within a package? Or the price? Or something else?
- Assess how much marketing you need to do. If you’re meeting your client sign-up targets, and then some, you may find that you don’t need to spend so much time every week marketing after all. Perhaps you can dial it back and use that time/money for something else instead? Alternatively, you can quickly see when you’re NOT on target and do something about it before the financial wheels fall off.
All these questions can be answered by knowing your income goals and how many clients you need to meet them. As they say, “knowledge is power.” Nowhere is that truer than in running a business!