Have you ever thought about the value of your database?  I had a good discussion with one of our clients today about the value of their database and how much it is worth to them.  He basically said that his business is nothing if he doesn’t have his database and it is the reason that they are jam packed this summer when typically their industry slows down in the summer months.  So how do you calculate the value of your database?

So I went out to Google some information on database worth and came across this article by Sarah Michel.  She’s answering the exact same question I’m posing and it is the value of your database.  According to IBM and a report in they released they found that each contact in your business database is worth $948 every year.  I’ll be honest, for a lot of us it all depends on the contact and it can go up or down depending on the value but if we used this figure for argument sake, let’s say the following scenario:

1. Business with 200,000 Contacts that are contacted once a year to promote services to (service oriented businesses such as cleaning, duct-cleaning, plumbing..etc)

• 200,000 Contacts
• Average value of $948 according to IBM
• Value of $189,600,000

OK…then again that calculation might not be so accurate after all!  But I will use a simple formula that I pulled together on a whim here since I didn’t think that $948 really makes sense when trying to calculate a value for your contact database.

Let’s try a different scenario and calculation:

1. Business with 200,000 contacts but only 2,500 actual sales are made.

• 200,000 Database Contacts
• 2,500 Actual sales made
• 1,000,000 in revenue

There are two ways of looking at it:

Each database contact is worth $5 and the other way of looking at it is that your 2,500 customers who purchased are worth $400 each.  But I would say that if it takes 200,000 contacts in your database to generate 2,500 sales then the actual value of your database is $5 for every contact in it.  See where I am going?  The theory is that the more contacts and touch points you make with your clientele can help you increase the value of your database.  The flaw with my calculation unfortunately is that you could have 10 contacts in your database and have revenues of 1,000,000 therefore making each contact a value of $100,000!

Regardless I hope you’re seeing my point in the fact that your database is worth a lot and sometimes it is the greatest asset in your company.  If you ever decide to sell your business you need to take into account this value.  As my client told me today without their database, they’d have nothing.

I was with our largest client today going over a system that we implemented for them earlier this year that has changed the way they manage their customers.  While it’s one thing to have a complex system like CRM (Customer Relationship Management) as part of your business it’s another to actually utilize the data to your advantage.

One of the staff members from this client said to me after I showed him the data available to him was: “Wow!  I can’t wait to show my boss these reports.”  The point being here is that he never knew what he had at his finger tips since he had never been introduced to any kind of data analysis let alone the old fashioned slicing and dicing of data in Excel.

So what are you doing in your business to understand what is going on with your customers and your business in general?  This client of mine realized he could run daily reports that told him exactly how many people came through their shop while also being to tell his superiors the exact cost of having to serve those customers.

So what can you do to start collecting intelligence on your customers?

1. Identify sources in your business that contains data.  This can be anything such as Quickbooks, mailing lists, quotes/estimates or if you’ve already purchased a CRM that is golden as well.
2. What are your key performance indicators (KPI’s)?  Ask yourself what makes your business tick at the end of the day.  When you look at a report what will tell you whether or not you were successful?
3. See if the data you found in Step 1 can actually tell you about your KPI’s and if those data sources cannot tell you what you need to know then you may need to find a better way to track this.

So while I say a better way to track things, let me clarify.  Don’t start tracking something for the sake of tracking it.  We call this “make work” projects and they are typically boring and discourage the person actually tracking them to produce anything substantial.

So let’s say your KPI is Number of Customer Visits Per Day.  I’ve seen people simply use their receptionist to tick off on a piece of paper each time someone can in the door.  I’ve seen others actually ask the person their name and record it in their database if it wasn’t already there.  Either way you’ve found a way to get this data.

You can’t tell me that gross revenue is your KPI.  That is definitely a 30,000 view from the air KPI but it isn’t going to help you target marketing efforts or to find out whether or not something is working in your business.  Customer Satisfaction scores could be a KPI for you and all you need to do that are surveys.

I’ve gone on a bit of a tangent on data from what business people don’t know they have to determining KPI’s for your business but at the end of the day there is plenty of data that can be translated into meaningful reports available to you.

I will leave this post with this comment: A good friend of mine was explaining to me years ago how important key performance indicators are.  He said the businesses that focus on a KPI of revenue will end up being a very cash focused business and may see a dip in customer service.  Whereas a business with a blend of customer satisfaction which becomes an integral part of reaching the revenue target becomes the central focus because your business will be growing quicker than the one that focuses on revenue.  Why?  It’s simple.  You treat your customers like king’s and queen’s and they will tell their friends therefore bringing in higher referrals.  Why do you think small businesses have such a high rate of referrals?  It’s because they still focus on customer satisfaction rather than just revenue.