If you follow me on social media, you will probably know how much I love it. More than likely, you would have found this blog via one of my social media pages.
I regularly engage with my clients on various social media platforms (how many accountants do?). Social media gives me an insight into the business we would otherwise not see and helps us all feel connected.
How can an accountant help me with my social media?
No matter how large or small your business, you need to know if you are making money and how much tax you need to pay - this is typically why you would need an accountant.
Advertising costs are generally tax deductible but these costs can often overrun if not monitored. I have often had to keep track of (and sometimes reign in) advertising spend for various companies over the years and make sure there is an effective return on the investment.
Through these years, I have seen a shift from the traditional adverts and promotions in the local paper to Google & Facebook ads and along with this shift, small businesses have turned into (almost) overnight successful global companies. Along with the use of online adverts, there has been an increasing shift for businesses to use Instagram influencers, SEO consultants and social media managers to promote their brand and break through the noisy world of social media.
Apart from tax and accounts, accountants help these growing businesses by providing key information about how their businesses perform throughout the year by giving them financial (cash, profit), non-financial reports and monitoring their Key performance indicators (KPIs).
What are Key Performance indicators (KPIs)?
Key Performance indicators (KPIs):
a measurement of progress
indicators of success against targets
act as decision-making tools for business owners. There are many KPIs for small businesses to monitor and if you are starting out in business below are a couple of social media KPIs to get you started
Why should I track my Social Media numbers?
Most people track their social media numbers without even knowing it. Whether they are checking the amount of followers they have or the engagement on a post, we all do it.
One of the reasons you should track your social media and marketing is to make sure you are not spending too much time and money and receiving little or no return.
Which Social Media KPIs should I monitor?
The Social Media numbers you monitor, will depend on your goals and strategy and whether you use paid adverts as well. I have several clients who use paid-for social media campaigns and spend thousands of pounds each month; however, they need to make sure they are making money on each advert. A way of measuring success is through Digital Traction Metrics.
What are Digital Traction Metrics?
Digital Traction Metrics are a combination of three different areas:
Scale - who is showing an interest in your service or products? Typical metrics for these are followers or connections you or your business has; how many visitors your site receives; registered users; organic growth; paid for development. With this information, you can keep track each month and monitor which areas are most successful.
Active Usage - This is the number of interactions a user interacts with a business. You can use daily or monthly active users and the number of repeat users and customers. If you have an online shop, you should be able to see the conversion and shopping carts abandonment rates along with how your customer has arrived at your store.
Engagement - you can measure the degree to which the user has engaged with your business. Suitable metrics may include time spent on site, Net Promoter Score (NPS), customer satisfaction index, posts contributed, the number of likes and shares, photos/videos shared/uploaded and views completed.
Which metrics can I use to measure success?
There are two metrics you can monitor which measure the cost of attracting your customers and keeping them. These are:
Cost to acquire a typical customer (CAC)
Add up all your expenditure on sales and marketing and divide this by the number of new customers won. If you don't spend much apart from your time, keep a track of this and use your time instead of cost to acquire new customers.
For example - if you spend £1,000 on Facebook and google ads in a month which generated 5 new customers. Your cost to acquire a new customer would be £200 (1,000/5).
If you do all your social media yourself and spend 1 hour a day on Instagram and acquire 5 customers, then this would then be 30 per month divided by 5 = 6 hours per customer.
Make a note of these each month and keep track in a notebook or on a spreadsheet.
The lifetime value of a typical customer (LTV)
There are different ways to look at LTV depending on your industry but if you work out the average monthly recurring revenue and multiply it by the average customer lifetime.
To be profitable, the lifetime value of a typical customer needs to be greater than the cost to acquire a typical customer.
For example, if your typical monthly recurring revenue per client is £1,000 and you typically have a client for 3 months the lifetime value of a customer would be = £3,000.
How can I know if my project is successful?
Hopefully, if your project is successful you should already see more cash in the bank, but if you would like to see valuable insights, there are two numbers which should help.
To give insight into profitability and cash flow, compare the Lifetime value of a typical customer (LTV) to the cost to acquire a typical customer (CAC). LTV should be greater than CAC. In the example above LTV was £3,000 and CAC was £200. This means the campaign was profitable and will generate you money.
How many months does it take to recover the cost to acquire a typical customer? Add up cost to acquire a customer (this can be all advertising and marketing spend) and divide by average monthly recurring revenue. So, if you spend £1,000 per month on acquiring a customer, and each customer spends £500 per month, it would take 2 months to recover the cost so your clients need to be with you for longer than 2 months to be profitable.
What Benchmarks are suitable for my social media metrics?
A suitable benchmark for digital metrics would require a review of your specific industry and will largely depend on who you do business with (B2B or B2C). Some competitor information could be available publicly, or you could be part of a network of businesses who would be willing to share some of this information with you (but you may need to share some of your data too). Getting to know your competitors and then use this to set some targets for your business to work towards.
How do you incorporate social media metrics into a finance report?
Monitoring the success of marketing campaigns and the time and cost spent on creating them is vital to monitor their effectiveness. Successful business owners spend time knowing what works and what is generating the most money.
If you would like to know more about monitoring your social media or marketing campaigns or setting targets and benchmarking, send me a message to see how we can work together or you can follow me on Instagram, Facebook, Pinterest, LinkedIn and Clubhouse (@RobynRichards).