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.