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Essential Business Metrics in Monitoring Growth
For every business to accurately check their business growth and business, they must track specific business metrics. However, many businesses do not yet understand the need to track these different business metrics. Tracking these metrics is vital because it can tell you if your business strategy is working or not. They also help in identifying areas where you need to make modifications to boost your business growth. They even assist in helping measure the time it takes to reach your business goal. Let’s find out these business metrics in measuring and monitoring growth.
Return On Investment (ROI)
This is an important metric that allows entrepreneurs to know if they are achieving their business objectives and goals. A higher return on investment translates to efficient revenue generation, while a lower return on investment represents a need for reevaluating your investment strategies. This means that return on investment is a vital metric that helps to scale up your business and ensure your business’s profitability.
Every entrepreneur knows that keeping track of income and expenses is vital to staying profitable. With ROI, you can measure your profit on investment by dividing your net profit by the total investment. A good understanding of ROI allows maximization of profits while ensuring long term business success.
Every business owner should monitor the performance of their website. You should not only track plain traffic, but also metrics like monthly traffic. With time, your website traffic numbers should increase. Doing this allows you to find out if your SEO best practices and other marketing efforts employed are effective or not.
Remember to also check out other traffic metrics like new and returning visitors, sources, bounce rate, and location to have a deep understanding of your overall traffic. However, it is important to note that traffic alone doesn’t count for much. What matters is if the traffic results in increased conversion rates. We will see the below.
Conversion rate means the number of leads that become paid clients based on your marketing efforts. To put it differently, conversion rate measures the number of leads you can convert into a qualified opportunity. This means people who want to buy your product do not take up your time.
Additionally, it could represent the success of your sales team in finding the right prospects and converting them to leads and eventually paying customers. This insight could also provide you with the knowledge on factors stopping your leads from converting to paying customers. Lead conversion helps you measure your progress, improve strategies, and outperform your competitors with sales.
Customer Lifetime Value (CLV)
Every business plan should incorporate a customer lifetime value (CLV). A CLV tells the total revenue an entrepreneur can generate from a customer. CLV can vary based on the sales model, so a way to calculate it is through the multiplication of the average sales value by the customer’s retention time (usually in months) and transaction number performed during the period. CLV is vital because it helps in:
- Mastering the art of cost-effective customer acquisition
- Know customer segments that are difficult to turn profitable or convert
- Recognize problems that reduce customer retention rates
Customer Retention Rate
This is the percentage of customers who return to perform transactions with your business or company after they make an initial purchase. It is an essential metric because getting new customers is more expensive than retaining existing ones.
Your business’s long-term success is dependent on your ability to ensure your current customers remain happy, so they continue buying from you. There are several methods of improving customer retention such as offering excellent customer service, loyalty rewards and even constantly innovating so you remain ahead of your competitors.
Leads Per Month for Business Metrics
This is the number of individuals that sign up for your business in a month. These sign-ups include webinar, consultation calls, lead magnets, or a demo. Knowing the number of leads per month can help determine the traffic amount you need.
For example, for every 1000 leads, if you generate 100 leads per month, it means your conversion rate is 10%. To get another 50 leads per month, you will need to get an additional 500 visits per month.
You can increase your conversion rate by directing traffic to a specific landing page instead of the homepage of your business. It could be a page for a brand new scheme, a discount voucher for products and services, or an upcoming event.
Customer Acquisition Cost (CAC)
Customer acquisition cost tells the entrepreneur what it costs to get a new customer. With CAC, you get to know the amount of money spent is getting new customers and whether your marketing efforts represent a positive ROI. If the CAC is high, then it can be difficult to increase your customer base and achieve your set objectives. On the other hand, a low CAC means you can easily get new customers for business growth.
Sales revenue is the total money a business gets from its sales. It is usually the major item on a business income statement. The sales revenue of a business that sells physical products includes the cost of sold goods and handling/shipping charges.
For business providing services, sales revenue also comes from its services incomes. Sales revenue is very essential because it shows the business performance. When sales revenue increases, it means the business is performing well. Tracking sales revenue ensures your business is on the right track to attain your financial aims. You can also use carefully curated data to find out new trends that allow you to make marketing decisions and strategic product development.
Endnote on Business Metrics
Measuring and monitoring your business performance allows you to find out potential issues and produce effective solutions for them. Monitoring the right metrics ensures your business is on the right path leading to your objectives. Since there are several business metrics that an entrepreneur can track, it is prudent to be judicious in your choice.
Don’t be overwhelmed with much data, as it can result in spending much time collecting and analyzing them. Instead, place your focus on the right metrics that help you gain insight and effectively manage your company. Knowing the important metrics as mentioned above, ensures you remain ahead of your competitors and improves your business’s growth and efficiency.