Small Business Toolbox

Currently, the toolbox includes four assisting tools: Customer Lifetime Value, Campaign Impact Assessment, Break Even, and Economic Order Quantity calculation. 1. The Customer Lifetime Value calculator will allow you to calculate CLV the simpler way; when the sales cycle is not too complicated you can approximate the CLV calculation by using the 'turnover', 'number of customers', 'gross margin' (% profit over sales), 'churn rate' (% of customers that stop buying from you every month), and the 'interest rate'. 2. The Campaign Impact Assessment will help you with calculating the probability that the outcome of a marketing campaign has been successful using a similar method as the A/B testing. You have two actions A & B; you'll need the receivers of each action, and the conversion rates (%) for each group, to obtain the probability of success. 3. The Break Even Calculator will calculate the sales point at which a business will start making a profit, on the basis of its costs and pricing strategy. 4. The Inventory Management will make use of the Economic Order Quantity and the Newsvendor model to help identifying the optimal order/inventory. More tools will be added to cover the areas of marketing, finance, and operations. --------------------------------------------------------- Customer Lifetime Value Calculator --------------------------------------------------------- So you managed to get that customer to buy from you! You made the sale… and is that all? Not at all; it is a mistake to consider that a customer is only worth the profit you get from that one sale. Have you considered this customer could be repeated and then buying again from you? Yeah! In fact, the type of customers we like are those that buy (and pay), and repeatedly in time will be buying again and again. However, no love story has been forever, and your customer will end up buying elsewhere; do not take it personal, but there are many reasons that this will happen, and marketers should know at which rate your business loses customers (i.e. loyalty, retention). If you consider this cycle, you are capable of calculating the average profit per customer and estimate the average customer life (as your customer), then you should be able to calculate how much a customer is worth to your business: the customer lifetime value (CLV). This calculator will allow you to estimate the CLV the simpler way; when the sales cycle is not too complicated you can approximate the calculation by using the 'turnover', 'number of customers', and 'churn rate' (% of customers that stop buying from you every month). When you need a more accurate value, you can do so by inputting the profit margin, and the interest rate. ------------------------------------- Inventory Management ------------------------------------- Companies that hold stock face two major costs: holding cost, and ordering. Both costs work in such a way that managers need to balance them; there is a trade-off: stock too much and your holding costs will eat your profits, keep your ordering frequency at high levels and your ordering costs will increase. There are many solutions available to optimise inventories. One of the most utilised systems is the ‘Economic Order Quantity’ (EOQ) model. This allows to calculate the order size, and hereby the reorder point that minimises the total cost of purchasing, ordering and holding stocks. The simplicity of the model resides in its ability to calculate such optimal quantity only considering demand, and the ordering and holding costs. Calculate the EOQ given an annual demand estimate, together with the total yearly orders and the total annual cost. Further, you can choose to calculate the EOQ when shortages may arise. For cases when demand is uncertain, the calculator will make use of the 'Newsvendor model' and will calculate the optimal monthly order given the selling price of the product, your costs, and the average monthly demand and its standard deviation.