What is Your Repeat Business Rate?

I once read an article about an entrepreneur who started a business, grew it into a multi-million dollar company and then hired a staff to run it and spent his time pursing other interests. The only information he insisted on getting from the company was a daily report that listed the number of sales of repeat business versus new business. This he claimed would tell him all he needed to know about the health of the company.
He knew that as long as he kept his percentage of repeat sales to existing customers even (or close to) the percentage of sales to new customers, his company would continue to grow and stay healthy. How does this work?

If you start to sell more to new customers than to existing customers - that means you are losing your existing customer base. Not a good thing. Either they are no longer happy with your product or service, or your competitor(s) are taking them away with better products or less expensive products. You cannot let this happen for too long, or you will be out of business. This is a strong indicator that your business is in serious trouble.

Conversely, if your sales to existing customers increases significantly over sales to new customers, you are not going to see your company grow. Sales will quickly start to flatten out and eventually less and less orders will come in. Your business needs a constant stream of new customers to stay healthy. Over time your existing customers will go out of business or be bought out by another company that only buys from your competitor. You need new customers to become existing customers.

If you keep check of this important ratio balance, you will have a strong and growing business.

The author, Marge Bonura, is the Director of Sales & Marketing for New England Machinery, Inc. (NEM). NEM is a leading packaging machinery manufacturer of bottle unscramblers, cappers, orienters, retorquers, lidders, pluggers, pump sorter/placers, scoop feeders, hopper elevators and much more. The company has been in business since 1974 selling to the food, beverage, pharmaceutical, personal care, chemical, household products, automotive and other industries. For more information on NEM, visit their website at www.neminc.com.