5 Key Indicators of Business Growth that You Need to Monitor
As a business owner, growth is undoubtedly one of your top priorities. You want to see your business thrive and expand. However, it can be challenging to keep track of whether your business is growing or not. That’s where monitoring key performance indicators (KPIs) comes in. By tracking specific KPIs, you can evaluate how your business is doing and make decisions to improve and sustain growth. In this article, we will discuss the top five KPIs to monitor for business growth.
1. Revenue Growth
The first and most apparent indicator of business growth is revenue growth. If your business is generating more income each year, it means it’s growing. Tracking revenue growth over time gives you valuable insights into the performance of your business. You can measure revenue growth using the following formula: (Revenue – Previous Period Revenue) / Previous Period Revenue X 100. For instance, if your business earned $50,000 in Q1 and $60,000 in Q2, the revenue growth rate for Q2 is (60,000 – 50,000) / 50,000 X 100 = 20%. A healthy revenue growth rate should be at least 10%.
2. Customer Acquisition Cost (CAC)
Customer acquisition cost (CAC) measures how much it costs your business to acquire a new customer. CAC includes all costs associated with marketing, sales, and advertising campaigns. By monitoring CAC, you can evaluate the effectiveness of your marketing and sales strategies. Ideally, you want to lower your CAC over time while maintaining or increasing revenue. To calculate CAC, you need to divide your total marketing and sales costs by the number of new customers gained in a specific period.
3. Customer Lifetime Value (CLV)
Customer lifetime value (CLV) is the amount of money a customer is expected to spend on your business throughout their entire relationship with you. By tracking CLV, you can determine the profitability of your customer base. If you have a high CLV, it means that your customers are loyal and generate more revenue for your business. You can calculate CLV using the following formula: Average Purchase Value X Number of Purchases Per Year X Average Customer Lifespan.
4. Net Promoter Score (NPS)
Net promoter score (NPS) is a measure of customer satisfaction and loyalty. It measures how likely your customers are to recommend your business to others. NPS is calculated by asking customers to rate, on a scale of 0 to 10, how likely they are to recommend your business to a friend. Customers who score 9 or 10 are considered promoters, while those who score 0 to 6 are detractors. Your NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.
5. Employee Engagement
Employee engagement is another essential KPI to monitor for business growth. Engaged employees are more productive, motivated, and committed to your business. By tracking employee engagement, you can identify areas for improvement and take action to create a more engaged workforce. You can measure employee engagement using surveys or other feedback mechanisms.
Conclusion
By monitoring these five key performance indicators, you can gain a better understanding of your business’s growth and make informed decisions to maintain and improve it. Revenue growth, CAC, CLV, NPS, and employee engagement are all critical indicators that, when tracked and improved, can help your business thrive. Keep in mind that these KPIs are not the only ones to monitor, but they are a great starting point for any business owner looking to evaluate the health and growth potential of their business.
