If you’ve ever questioned my business philosophy, this may be another one of those times. One of my clients who is also a massage therapist asked me if I knew my cost per client. My answer was no. At first, I felt like I was dropping a huge ball by being so out of touch with my business. But I decided in that moment that it doesn’t matter.
Cost per client equals how much it costs to provide a massage to each client. Three expenses that determine that are marketing, supply and fixed costs.
- Marketing costs = the amount spent acquiring customers. This varies by client because not everyone hears about us the same way. If you’re not sure where your clients are coming from, perform a marketing audit. Then calculate how much each category costs by dividing the amount spent on that marketing activity by the number of clients it brought in. (One of the things I love about using Groupon is geting paid for all vouchers that are purchased even if they are never redeemed.)
- Supply costs = the amount spent on sheets, oil/lotion, essential oils, music, laundry, etc. that are used for each session. This will be fairly consistent even if you don’t give everyone the same massage. Total up what you spent last month for these things and divide by the number of clients you saw.
- Fixed costs = rent, utilities, phone, taxes, insurance… If your monthly client load varies, these costs per client will as well. These costs (mainly utilities) may also fluctuate seasonally. Calculate them monthly for a year and average to simplify the process.
The main reason to know our cost per client is to determine our pricing. We have to make more than it costs to provide our services to be profitable and stay in business. I don’t think cost per client matters because my bills get paid on a monthly cycle, not hourly. As long as I’m making enough to cover my living and business expenses, it’s all good. If not, I need to change something.
If more income is necessary, we have options. With a schedule that isn’t full, the best course of action is to do more marketing to attract more clients. Use your marketing audit to maximize your efforts by doing more of what’s most effective. Implementing a loyalty program may get current clients to book more often. A price increase may be the only way to create more revenue from a full schedule.
If you want to know your cost per client you should, but running your own business does not have to be complicated. As much as I advocate analysis, this seems like busywork to me. I’ve chosen to use my checkbook as my guide. So far, this method has kept the practice that I love going and growing!
What calculations have you found helpful or irrelevant for your practice? If you don’t see a comment box, click the Leave a comment link to share. Thank you!