The Most Common Growth Metrics Owners Ignore When Running a Business
As a small business owner, there’s no shortage of tasks to complete on your daily to-do list. This is especially true when you’re a team of one, doing your best to keep operations afloat and build towards future goals.
The constant chaos is part of the rush for most. To build something from nothing is an exhilarating mix of anxiety and accomplishment.
It’s not enough to set the wheels in motion and hope for the best though. To manage a successful business, you need to pay attention to the numbers. And more importantly, you need to learn from them. Here are the most common growth metrics owners ignore when running a business.
Your expenses directly impact take-home profit. And yet, many business owners either track them irregularly or not at all.
Reconciling against your bank statements and saving receipts are only part of the equation. When tracking, it’s important to understand which departments expenses are associated with. Doing so helps businesses to scale more strategically, budget for the future, and deduct accordingly come tax time.
It’s all too easy to find yourself in a financial pinch when you’re not keeping tabs on what’s due when. Bill due dates won’t wait for customer sales.
Make sure you’re paying attention to accounts receivable and not spending outside of your means. There’s a time and place for making investments in your company’s future—so long as it’s not at the expense of your service providers getting paid on time.
Profit and Loss
Profit and Loss (P&L) reports provide a snapshot of the revenue, cost, and expenses for a business during a specific period of time. Reviewing these summaries regularly provides insight into what is and isn’t working for your business.
It’s an easy way to gauge the profitability of investments made and reallocate budgets when new opportunities arise. Avoid getting caught up in trends and make the most of the money you have to spend with a focus on growth.
Customer Acquisition Cost
Marketing your business comes with a price tag attached. Customer acquisition cost (CAC) is one such price that many business owners fail to keep in mind when targeting consumers online.
In order to control costs, it’s important to analyze how expensive it is to acquire new customers through any given marketing channel. Doing so allows you to focus your efforts on areas that give you the most bang for your buck.
In conjunction with CAC, lifetime value helps you determine just how profitable the average customer is to your business in the long run. For example, a customer with an average LTV of $5.00 is not going to be worth the same amount of effort as one with a much higher value.
Knowing what a customer is ultimately worth to your business helps you make more strategic marketing decisions when working to generate new ones.
Growing your customer base exponentially is a good thing. But if you’re failing to retain them faster than you’re acquiring them, consider yourself stuck at square one.
In general, it costs your business much more to bring on new customers than it does to foster relationships with current ones. Be mindful of your business’ ability to keep consumers coming back for more in order to build the best possible experience around first purchases and beyond.