Metrics you need to know right now
What measures do you use to determine if your business is growing the way you want? What marketing metrics should a business like yours be watching in order to understand your growth? You'll need to access objective data to tell you whether or not your business is achieving its aims, and what you need to do to keep growing. To that end, here are five metrics you essential for you to keep track of.
There are so many option to pick from in today’s technology that make it easier than ever to track these metrics and do it yourself in-house without hiring an analyst. Google Analytics offers a robust array of metrics and is free to use. There are also paid software programs you can use that automate calculating the data you need.
Metric #1: Return on Revenue (ROR)
The revenue return rate is how much profit your company is making after expenses are subtracted. Take your total income and subtract your operating expenses. The calculation must include day-to-day expenses, as well as expenses that aren’t as easily seen (such as rent and office supplies) and non-cash factors like inflation or depreciation of properties.
How to calculate your ROR?
The return on revenue (ROR) is calculated by dividing the net income by the revenue. This can be expressed in the following formula.
Return on Revenue (ROR) = Net Income / Revenue
Both of these figures can be found in the income statement. Net income is also sometimes referred to as profit after tax.
Need a little more help understanding this metric? Read this article: Return on Revenue (ROR) from ReadyRatios.com
Metric #2: Your average customer spend
Your average customer spend tells you how much each customer buys from you. It's calculated by taking your total revenue and dividing it by the number of current customers you have. This metric gives you an indication of how your business is performing.
For more help on this topic, including a helpful list of suggestions to increase your Average Customer Spend, read this article: 14 Ways to Increase Customer Spend by marketingwizdom.com
Metric #3: Your customer acquisition cost
This metric . shortened to CAC, is the cost of convincing a potential customer to buy your product or service. It tells you how much your sales and marketing efforts are paying off, and what resources you need to convert leads into customers. You can use this to predict your future finances as you grow. Learn more about Customer aquisition cost from HubSpot here
Metric #4: Your customer retention rate
The customer retention rate tells you what percentage of your customers stay with you and buy again. It costs much more to gain new customers than to keep existing ones. If your rate of retention is low, your business is losing money. Low customer retention means you need to step up your efforts to engage and offer continuing value to your audience. Want to know how to increase your Customer Retention rate (CRR)? Check out this post from Salesforce.
Metric #5: Your return on advertising spend (ROAS)
This metric looks specifically at the cost of advertising and the amount of revenue it's earning you. It tells you whether your advertising spending is paying off or not. If it's not, you need to consider more effective or less expensive methods. Here’s a great post explaining this concept. What is ROAS? The Complete Guide to Using Return on Ad Spend [CALCULATOR]
Metrics help you assess your progress, but if you really want to see growth, you should set goals and timeframes for achieving them. You can then make changes and tweak if you're not seeing the results you want.
Do you want to know how to grow your business and reach your goals? Then check out my full course here: Business Building Bootcamp