What’s the most valuable asset your small business has?
You might think it’s your studio equipment or perhaps your inventory, but the truth is that your customer base is one of the most important and often the most valuable asset you have.
Consider the income that is generated through making repeat sales to your wholesale customers. That system of acquiring ongoing sales is the engine that drives income and growth for your business. Each customer that you have is hard earned; you must put time, energy and money into presenting your work, meeting prospective customers and closing the sale. The cost of acquiring that customer may seem high at first, but as time goes on and reorders roll in, the cost of that customer diminishes. This makes your business even more profitable.
Your customer base is also valuable in the sense that if you plan to retire or sell your business, the expected annual revenue from ongoing customer orders is a huge factor in determining the value of your business itself.
Still, your customer base will have turnover. All businesses experience this. As a general rule, 20% of your customers will have to be replaced each year. They will fall off because the store closes, there is a buyer change, or perhaps because they have made a decision to either discontinue your line or take a break for a while.
This is where you must prospect for new accounts through marketing, participating in trade shows and prospecting for galleries and retailers that are a good fit for your work. Some artists have sales reps to promote and sell their line.
If you have a solid marketing plan in place, it should be active at all times – even when you are busy filling orders. It’s important to have a consistent presence, having your handmade work seen by retailers searching for merchandise to stock in their stores. As you gain new customers to maintain and build your base, you are increasing the value of that important asset.