While starting a business never seemed easier than it is today, the fact is that there are about 30.2 million small businesses operating in United States at this very moment. This means that the competition is tough regardless of the industry. Moreover, the concentration of these businesses is fairly uneven, which means that if you were to start a business in a major business hub like Sydney, you would face an even steeper hill to climb. For all those aspiring entrepreneurs willing to grow their business from scratch, here are the five most important metrics to monitor and a couple of tips on how to give these areas of your business a slight boost.
Your sales revenue is an incredibly important metric, because it gives you an idea of just how much money your company has at its disposal. The way to measure it is fairly simple, because all you have to do is sum up all the income from purchases, minus the cost of the returned or undeliverable products. Needless to say, you don’t have to be a finance expert in order to handle this. There are two ways to increase your sales revenue. You can either A) increase the number of your sales or B) increase the average value per sale.
While the previous tip is incredibly important, when it comes to growth, sales growth is one of the best indicators of whether your business is moving in the right direction. What you need to do here is set two dates (a starting point and an endpoint) and check how your sales have increased over the course of time. Later on, you can turn this into percentage in order to get a simpler picture of your growth. The way to improve this metric is usually to increase your marketing spending.
This is probably the hardest metric of all to monitor, because it’s seen as somewhat abstract. According to Price’s law of productivity, a square root number of your employees are doing half the total work around the office. This means that while competence grows linearly within your organization, incompetence grows exponentially. If you could improve this, you could see a massive boost in productivity. Fortunately, there are a lot of ways for you to do so, ranging from hiring a business coach in Sydney all the way to starting a mentor program.
Cost of Customer Acquisition
In order to get a certain number of customers on your side, you need to make an adequate marketing investment. Once you divide this figure with the total number of audience gained, what you get is the cost of customer acquisition. This indicates how much money you need to invest in a single customer, and what you get to see is the efficiency of your marketing and your business model, in general. Overall, the cost of customer acquisition is an insightful and simple metric to track.
Customer Retention Rate
The very last thing you need to keep in mind is the fact that only 8 percent of regular customers make about 40 percent of your entire profit. This means that the more return orders you have, the higher your customer loyalty grows and the more profitable your business will be. Therefore, the customer retention rate might just be one of the most relevant metrics for the growth of your small business.
While there are other metrics worth following, such as net profit margin, gross margin, and monthly website traffic, these five are definitely the best indicators of just how well your business is doing. They are also a reliable foundation on which you can base important business decisions later on.