In a previous article I discussed how to use an invoice ledger as a marketing tool in for a mailing list campaign. In this article I will discuss how to use the expense ledger.

Understanding sales and income is necessary but it is only half of the equation. When using mailing lists to expand your business it is vital to keep track of the costs as well as the income. By tying the cost of each promotional activity directly to its income, you will be able to determine the profitability of your marketing campaigns and be able to make better decisions on how to buy mailing lists.

ROI – Return on Investment

Nowadays one hears a lot of buzz about ROI. What exactly is ROI, anyway? It is the return on investment of your advertising expenses. Are your mailing list campaigns profitable or not? How are you going to know? The only way you will be able to determine if your marketing investments are making any money is if you track them one by one. It is absolutely crucial that you keep good records. On the income side, you used your invoice ledger to identify all sources of income by categorizing each invoice according to the source of its sales lead. Now on the flip side, you categorize your promotional expenditures according to the marketing campaigns used to generate the sales.

The Expense Ledger

Shown below is a chart of sales expenses for one year that was collected from the expense ledger. You list out all the same sales lead categories that were used in your invoice ledger. In this case we have categories for printing, phone, trade shows, ads, direct mail and miscellaneous. We are going to have to do some estimating here because some of the printing expenses were general in nature while others were tied to specific marketing campaigns. But you can get the idea.

expense-categoriesClick to enlarge

Graph the Results

After you have identified the sales expenses for all the promotional activities, you can tie it all together and determine the profitability of each marketing campaign (or lack of it). The thing that’s nice about a graph is that you can spot the winners and losers in an instant. Now that you know if your mailing list campaigns are making money or not, you can make better decisions on how to buy mailing lists.

sales-vs-expensesClick to enlarge

Now, please bear in mind, when you look at results like these not to panic and do anything rash! If a particular promotion didn’t pan out, it doesn’t automatically mean that you have to abandon it. Sometimes you have to go back to the drawing board and come up with a “Plan B.” You should have a feel for your industry, your competition and the various media outlets and marketing channels available to your business. Your experience, abilities, knowledge and confidence should guide the decision making process.

If you find that the return on some of your promotional expenses is not as profitable as it should be, then ask yourself, “Are there any competitors in my industry that are successful?”; “What are they doing that I’m not?” Try to figure it out. Watch your competitors very closely. On the other hand you might be doing something that is very successful that your competition is completely unaware of or is unable to do. In that case, you’ve got a trade secret and you need to keep it that way.

Winners and Losers

In the previous example, several of the sales categories are pulling some pretty healthy ROI. Phone sales, field sales, referrals, repeat sales and direct mailings are all very profitable. They are all pulling income in the multiples of their expenses. This is a bean counter’s dream. The areas that need improvement are trade shows and magazine ads.

Use This Information to Help Expand Your Business

As you can see from this series of articles, it isn’t difficult to use your income and expense ledgers as marketing tools to help expand your business. This should serve as an example and give you some ideas on how to implement good record keeping in your business and be able to identify the profitable vs. unprofitable promotional activities. Surely you should be able to use mailing lists to expand your business. Most any business should be able to benefit from a well thought out direct mail campaign.

Mailing Lists Direct is a full service direct mail list company where you can find consumer lists, business lists and specialty lists at competitive prices. Mailing Lists Direct provides first rate customer support. No matter what your business needs in the way of an address list or managing your mailing list campaigns, Mailing Lists Direct will be able to satisfy all your needs. Call toll free at 800-741-0116.

Mike Doughty is a small business owner and entrepreneur with a background in direct mail marketing, manufacturing and distribution. During his career, he produced a mail order catalog and worked on many successful direct mail campaigns.