Taking a start-up off the ground is no small feat. But after being in trenches for a couple of years, how to figure out what your business is gaining the required momentum? How to know that the idea you’ve capitalized everything into is going to be there for long?
If you’re tinkering with the same question, then the answer is simple. It’s the numbers (not necessarily the Return on Investment). Numbers are the heartbeat of any business, by tracking and measuring the data your business produce, combined with consistent analysis, can put your business on the right track. It’s extremely important to spend some time to measure your venture’s progress and be focused to develop the required metrics to monitor your business growth.
Here’s a quick guide to assessing the success of your business.
Create a Growth Evaluator
Everything can be measured, but it is sane to evaluate the low hanging fruits, first. As you start to grow your business, it’s important to track how your venture is scaling. Your revenue run rate will evaluate how sales are developing over time. It helps you see how tactfully you capture the industry trends, pick up patterns and tease out potential hurdles with your pricing strategy.
Average Revenue Per User
This will help you evaluate a customer’s average contribution to your revenue. An increasing level means you’re getting more sales. It will also help in quantifying the quality of your sales. This will offer you a knowledge and a better understanding of how sales break down by channel and customer type so that you can dedicate resources to optimize your customer base and scale your business share.
Customer Acquisition Cost
Have you ever calculated how much does it cost to attract a customer? Your Customer Acquisition Cost will show you that. It’s one of the most effective ways to evaluate your sales process. So, it’s important to have your CAC in place.
How sticky are your customers? Your spin rate will explain how to hold onto your customer base. The absolute value is vital, but you should never lose the trend. Your rate should drop over time. If it towers at a high level, then you should figure out why. The numbers will always guide your way through. You should always know how profitable your customers are.
Are you getting enough returns on your spending? It is important to understand whether you’re getting enough returns or not. As these numbers will help you to scale your business better. Low margins could signal that your price structure is out whack, that you’re spending too much or your cost is too low, or its the combination of both. Outsourcing can be an efficient way to handle some of the biggest drivers. But, when you’re ramping up, it’s a need of an hour to spend more on marketing to get enough traction.
Always remember to spend in right proportions to receive bang for each buck you spend. The systematic operations will result in a rise in sales and cash flow.
Your profit margins evaluate your operating profitability. Profit margins will reflect how effective your management, sales, marketing and customer teams are at driving the business, at what stage of the curve your business is in and what pedals your venture to drive growth.