As the CEO of a local internet marketing agency I realize that there is nothing more important to the long-term health of my organization than client retention rates (what percentage of my clients do I keep as paying clients month after month). I’m a firm believer that if you provide great service and get your clients results (solid ROI) they will stay with you…and if you wow them, they will refer you to their friends & colleagues. As I network with other local agency owners I’ve come to the realization that many don’t really track their customer retention rates. Perhaps that’s because they don’t feel they have enough clients or maybe, they simply don’t know how.
In this post, I want to share a simple formula for tracking your client retention rate over time and would encourage you to run your retention numbers on a monthly, quarterly and annual basis. If you have a team be sure to share this number with them so everyone can get on-board with maximizing customer retention.
Formula for calculating client retention rate:
This gives us CRR = ((E-N)/S)*100
1. Number of clients at the end of a period – E
2. Number of new clients acquired during that period – N
3. Number of clients at the start of that period – S
You can set up a simple excel sheet that looks something like this:
|Number of clients at end of period||75||79||89||102|
|Number of new customers acquired during period||5||3||13||16|
|Number of customer at start of period||73||78||79||89|
** The Formula for the “Retention Rate” cell should read something like =((B2-B3)/B4*100)
Why Track Customer Retention Rates?
It’s very easy to focus on “new client acquisition” and set aggressive growth goals…but if you are loosing clients as fast as you are selling them then your not getting anywhere. Your like a hamster on a hamster wheel. You need to focus just as much (if not more) on retaining your existing clients as you do on getting new ones.
I’ve found the old axiom “what get’s measured get’s done” to be very true. If you and your team are measuring retention rates on a consistent basis then your overall client retention will improve.
Are you tracking client retention rates? Is this formula helpful? Please post your thoughts and comments below.