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This is why many smaller companies experience higher advertising percentages then larger companies. When the larger companies indicate on industry surveys that they spend 6% of revenues on advertising, that 6 % is on total revenues. This percentage includes retained customers where there is no advertising dollars spent to retain these repeat customers as well as money spent on bringing in new customers. Smaller companies spend a greater per- centage on advertising because they don’t have as many retained customers to spread the cost of advertising. A better way to think about advertising is the


total spend divided by the revenue of the actual new customers derived from that spend.


What happens when we increase or decrease the


dollar amount spent on advertising in the year of measurement? In this case it skews our retention percentage. For the purpose of our example, we need to substitute the actual spend in year two with the same spend as in year one to perform a consis- tent calculation.


Conclusion As business becomes more complicated and success- ful companies strive to become more efficient, there will always be room for those that provide quality service. Maintaining and improving the quality of service is key. Benchmarking callbacks and customer retention while consistently raising the bar goes a long way in your firm’s ability to grow.


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Daniel S. Gordon is a CPA in New Jersey and owns an accounting firm that caters to PCOs throughout the United States. Visit www.pcobookkeepers.com for information about his firm, PCO Bookkeepers. He can be reached at dan@pcobookkeepers.com


16 PESTWORLD MARCH/APRIL 2011


www.npmapestworld.org


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