Why Growth Isn’t The Only Metric, You Should Be Pursuing for Your Business

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Key performance indicators (KPIs) remain essential from the moment you start your business. These metrics measure your progress, making it easier to track your achievements and how close they are to your goals.

There is no point in tracking irrelevant KPIs since they can be distracting. On the other hand, growth is an important KPI, but concentrating only on that can lead to losing focus on other important metrics that will help you keep your products performing.

Growth Performance Metrics

A company’s most important growth metrics include sales revenue, net profit margin, gross margin, and sales growth. These four metrics will give you a clear idea of how your business is performing, but not all business growth charts look the same. As an entrepreneur, you want to have that success story, but numbers are not always giving you the whole picture, often leading to changes that can hurt your business.

Focusing on Finding the Balance

Being data-driven is essential, but other invaluable insights can give you information about your company’s performance through every stage of your product cycle. Some other business metrics that you should be pursuing for your business include the following:

1.      Cost of Customer Acquisition

Acquiring customers comes at a high cost to your business’s success. You calculate this by dividing the costs of acquiring new customers (marketing expenses) by the new clients you acquired over that period.

Known as the Cost of Customer Acquisition (CAC), the lower the cost, especially when measured with the Customer Lifetime value, gives you an idea of whether you are getting a valuable deal.

Therefore, if your average marketing spend was $8,000 and you acquired 50 customers, that means and CAC of $200. On the other hand, if those customers spend an average of $1400, your customer acquisition is worthwhile.

Calculate Customer Lifetime Value by multiplying the average value of a sale by the number of repeat transactions and the typical average retention time in months for your customers. These metrics allow you to understand which segments of customers bring in more profits so that you can focus on them.

2.      Customer Loyalty and Retention

Loyal customers help your marketing efforts. Therefore, you want to keep track of the Retention Rate, showing you the customers that keep making repeat purchases.

The formula for measuring Customer Retention looks like this:

Retention Rate = (((CE-CN)/CS)) X 100

  • CE = amount of customers at the end of a predetermined time
  • CN = amount of new customers acquired during the same time
  • CS = amount of clients at the start of the time

Increasing customer loyalty and retention requires delivering the best products that meet their needs and an excellent customer experience.

3.      Net Promoter Score

The features of your product and the level of customer satisfaction give you the Net Promoter Score, which shows how likely a certain number of people are to recommend you to others.

A score above 9 indicates loyal customers that will recommend you, whereas a score of up to 6 means they have a negative image of your company. In-between, a score of 7 or 8 are passive customers who may leave when a better offer presents itself.

The only way to measure the relevant data for the Net Promoter Score is with customer surveys on a ten-point scale.

Customer service, good products, and providing customer information help improve customer experience.

4.      Monthly Qualified Leads

Understanding the leads that can become sales is essential for a new company as it invests in marketing. You should measure these monthly to help you target your marketing correctly. Declining qualified leads means that you must re-evaluate your marketing and sales strategies.

Keep an eye on the three types of leads, marketing qualified, sales-accepted, and sales qualified, and target the ones most interested in your products.

5.      Lead Conversion Rate

It would help if you also watched the lead conversion rate by dividing the number of monthly leads by your monthly acquisitions. Low conversion rates could indicate a bad product-market fit or poor sales team performance.

6.      Website Traffic

Your monthly website traffic can indicate a lot about your business reputation. Plenty of visitors demonstrate that your marketing is paying off. Google Analytics is the top tool to help you track where your website traffic comes from, allowing you to enhance your efforts elsewhere. Besides paid advertising, you can also use cheaper and more efficient tactics like improving your SEO, posting helpful content, and getting free press coverage.

Final Take

Business growth metrics offer vital insight into the core business focus of revenue and profitability, but knowing more about your customers and market size can help give you a more diverse picture of your market.

Frequently Asked Questions

What is a good metric to track for business growth?

Several metrics can help track business growth, including customer acquisition costs, customer lifetime value, customer retention rates, net promoter score, monthly qualified leads, lead conversion rate, and website traffic.

How do I calculate customer lifetime value?

Customer lifetime value can be calculated by multiplying the average value of a sale by the number of repeat transactions and the typical average retention time in months for your customers.

What is a good retention rate?

A good retention rate will vary depending on your industry and business model. Still, generally, a retention rate above 9 indicates loyal customers that will recommend you, whereas a score of up to 6 means they have a negative image of your company.

How do I increase my lead conversion rate?

Several ways to increase your lead conversion rate include improving your product, providing better customer service, and targeted marketing.

What is a good website traffic number?

There is no one-size-fits-all answer to this question, as the amount of website traffic considered good will vary depending on your industry and business model. However, increased website traffic generally can be a good indicator of business growth.

What is customer lifetime value?

Customer lifetime value is the total value a customer will bring to your business throughout their relationship with you. This metric can help assess the long-term viability of your customer relationships.

What is a net promoter score?

Net promoter score is a metric that measures customer satisfaction and loyalty. It is typically calculated using a survey on a ten-point scale, with customers who give a score of 9 or 10 considered to be promoters, those who provide a score of 7 or 8 considered to be passive, and those who share a score of 6 or below considered to be detractors.

How do I increase my net promoter score?

Several ways to increase your net promoter score include improving customer service, providing good products, and giving customers the information they need.

What is monthly qualified leads?

Monthly qualified leads are the number of leads your sales team has determined to be qualified for further consideration each month. This metric can help assess the effectiveness of your lead generation efforts.

What is customer acquisition costs?

Customer acquisition costs are the money you spend on marketing and other activities to acquire new customers. This metric can help assess the efficiency of your customer acquisition efforts.

How do I reduce my customer acquisition costs?

There are several ways to reduce customer acquisition costs, including improving your marketing efforts, reducing your prices, and offering discounts or other incentives.

What is customer lifetime value?

Customer lifetime value is the total value a customer will bring to your business throughout their relationship with you. This metric can help assess the long-term viability of your customer relationships.

How do I increase my customer lifetime value?

Several ways to increase customer lifetime value include improving your product, providing better customer service, and targeted marketing.

What is a lead conversion rate?

Lead conversion rate is the percentage of leads that are converted into customers. This metric can help assess the effectiveness of your sales and marketing efforts.

How do I increase my lead conversion rate?

Several ways to increase your lead conversion rate include improving your product, providing better customer service, and targeted marketing.

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