How Much Can You Afford to Spend to Acquire a New Customer?
By [http://ezinearticles.com/?expert=Bret_Ridgway]Bret Ridgway
Do you know the lifetime value of your customers and how much you can afford to spend to acquire a new customer?
If you don’t know these numbers, you don’t know anything. You’re totally shooting in the dark with your information marketing business when you have no idea of what marketing channels are working for you and what the cost of acquiring a new customer is and what that customer is worth to you over their lifetime.
I first learned about the concept of lifetime customer value from marketing legend Jay Abraham in the mid-1990s. While we’re talking about the information marketing business, understanding of this concept is essential to any type of business.
The basic calculation of Lifetime Customer Value is a simple one. Just divide your revenue over time by the number of customers who generated that revenue. That gives you the average lifetime value of a customer to you. You can use that figure to determine how much you can afford to spend to acquire a new customer.
I think it’s more important to think of this in terms of the profitability of a customer rather than just the gross sales revenue. If you have hard costs associated with making a sale those should be taken into account before deciding the justifiable new customer acquisition cost you can afford to absorb.
You should also remember to segregate your customer list in different ways as part of your analysis process. Customers who participate in a continuity program of yours may have greater value than others. Or people that attend live events may be of greater value.
You should also look at your various lead generation sources. You may find that one particular marketing channel generates far more valuable customers to you than another. Or you might find certain socio-economic groups, or countries, or sex, or ethnic group might generate higher value customers.
Know these numbers. It’s critical to your long-term success.
Bret Ridgway is co-founder of Speaker Fulfillment Services, a company dedicated to helping information marketers. To pick up your own copy of his “Information Product Development and Launch Checklist” visit http://www.50BiggestMistakes.com
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What Price House Can I Afford
So you are in a serious thinking about buying your own house or maybe buying another one instead of what you have now? I kinda wonder – you are married and your wife or your husband want that and you need to understand what this is about, right? Kidding!
Anyway, there is no magic and certain amount of dollars you can be searching here regarding the home you really want to have. “How much house can I afford?†The answer to this is based on many factors, including your location, income, savings, personal preferences, and most importantly, the house-buying plan you have in place.
In the most ideal case you could buy a house by putting down 100% of it. Sounds fantastic, doesn’t it?! But think how much fun and pleasure that could really be! Don’t borrow money. Don’t enter debts. Don’t become bound to hard work forever to pay it back. Wonderful!
Anyway, although if that kind of amount is too high a shot, I strongly suggest you save a down payment of 20% or even more, choose a 15-year (or less) fixed-rate mortgage, and also limit your monthly payment for the mortgage to 25% or less of your monthly income.
Only then you can comfortably enter the house and not struggle every day to keep with all the payments and debts that keep coming. After all, you want your new home to be a blessing, not a curse. Don’t forget that after entering a new house, everyone would really want to make is as comfortable as possible, buy all the nice things to feel that they own it, you know.
So, if you buy a house with nothing down and a astronomic monthly mortgage payment, you’re actually inviting Mr Murphy to move into the spare bedroom. You know – all the things that you really didn’t want to happen start dropping on your head and exploding in your face. So, you do NOT want that loathsome Murphy as your house mate – please, believe me!
Here’s a quick checklist of the most fundamental questions to think over seriously if you truly think over how much house you can realistically and comfortably afford. If you cannot sincerely answer YES to most of these questions with that house image you have in your mind, then it would not be a wise decision to buy it right now.
- Can I give as a down payment at least a 10% and preferably 20% of the house price?
- Can I make sure those mortgage payments would be at or below 25% of my monthly household gross income?
- Am I in place personally and as a family to bear a 15-year fixed-rate loan?
One last thing – please, take my suggestion below to make sure you are just not one of those newbie naive loan shoppers who are exactly the type that any mortgage lenders are looking for to make their best profits on. Make your homework and read all the necessary books and recommendations before jumping into 15 year mortgage loan, will you?
Do you know that the “system” is stacked against you and it is staggering that most people don’t know how to shop for a mortgage! If you want a mortgage with the lowest rate and for the lowest points and fees get you own copy of The TEN Dirty Little Secrets of Mortgage Financing
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I hear that question again and again. So many people want to have their own house, own place to come home to be with the family and children. In this short article I want to give you the basic calculation to know how much you can afford to pay for your new house once you decide to buy one.
To give you the shortest answer to that question: how much you can afford to pay for the new house really depends on a number of things, the most important of which is your gross household income – just how much you get for your job or all the income from your business, if you are a business owner. Then add to it your down payment to sign the papers for the new house and, of course, the mortgage interest rate.
This is the list of it:
- Gross household income
- Down payment for new house
- Mortgage interest rate
And since lenders are not stupid, they will also consider your assets – what you own and surely – your debts and other liabilities. So you better try to get rid of some of your debts before you get to ask for a mortgage and especially before negotiating the mortgage rates.
If you want to get to some real numbers, I suggest you use one of the free mortgage calculators to estimate the maximum mortgage you can afford to ask for in the banks. This calculations are based on two simple rules that most of the lenders tend to use to decide how much of a mortgage a person can afford to pay back.
The first rule is that your monthly costs for keeping a house should not exceed 32% of your gross monthly household income, meaning yourself and your wife.
Housing costs include:
- Monthly mortgage payments
- All the taxes you pay
- Heating expenses
- If applicable, the monthly condominium fees
Secondly, your entire monthly debt sum should not be any more than 40% of your gross monthly income. This includes housing costs, all other debts such as car payments, personal loans, and credit card payments your family pays every month.
So to summarize how to calculate how much a mortgage you can afford to take and pay back:
1. Calculate your gross household income – mortgage payments can be no more that 30% of that. 2. Calculate your monthly debts – these payments can be no more than 40% of your income.
I just know that feeling of really wanting to have your own house, but being afraid to jump into such a financial commitment. Since I was there, I would rather first search for a way to learn all the tricks there are to have my own house without getting into any danger of heavy debts.
Aren’t you just tired of asking banks or other lenders if they would let you have you own house? With Mortgage Saving Handbook you can have your own house and know the real secrets of the landing game
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