When you’re running a business, it’s easy to get caught up in everyday tasks. For example,
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However, you should also spend time each month examining the main finance-related metrics of your business. Tracking these key business metrics will help you to spot potential problems. Better yet, you can learn about existing problems before they become major ones. All of this will make it easier to see which areas have the best potential for growth. What’s more, tracking key business metrics will give you insights for better strategies going forward.
Customer Acquisition Cost
One of the first things you need to know is your customer acquisition cost (CAC). This refers to the amount you have to spend to acquire each new client. This is an important metric. That’s because it shows you if you’re spending too little or too much on your marketing and sales strategies.
Once you’ve determined your CAC, you can decide whether the amount you’re budgeting is right for your business. The items that go into this metric are things like advertising, search engine optimization, events, giveaways and the like. This key business metric varies significantly from business to business. Moreover, the customer acquisition cost usually goes down as organizations grow and build a more recognized brand name.
Lifetime Value of Customers
Another key business metric that relates to your customer acquisition cost is the lifetime value of customers. This metric also helps you analyze your marketing and sales budget. The term refers to the net profit you will receive from your clients over the course of your relationship with them.
The lifetime value indicates the repeat business you’ll get from shoppers over time. As a result, it helps you to know how much money is sensible to spend on “buying” each new customer. The higher the lifetime value, the more you can outlay. That’s because you’ll have more chance of earning this money back.
Client Loyalty and Retention Rates
You won’t likely achieve the business results you’re after if you don’t spend time thinking about ways to continually
Customer loyalty also leads people to recommend you to their friends, family members, and other contacts. In turn, this helps you obtain new customers in an affordable way. This word-of-mouth advertising is invaluable.
If you have a high “churn” rate, this means that most people only ever shop with you once and never return. In this case, you probably have various problems with your business that need to be addressed immediately. For example, your product range or quality could be low. Or, your customer service might be lacking. Likewise, your shipping times may be too long.
As you can see, it’s vital that you analyze retention rates regularly. There are a few different methods of measuring this metric. For example, you can send out customer surveys. Or ask clients for direct feedback when they purchase from you. Alternatively, you can examine transactions to work out what percentage of customers buy from you after their first purchase. It also pays to determine the average number of times customers spend money with your firm. Additionally, calculate the average amount of each transaction. Then look to see if this changes over time.
Keep Your Hands on the Wheel by Watching These Key Business Metrics
Pay close attention to the key business metrics we have discussed here. Then use the insights they give you to steer your business toward greater success.