The Top 5 Business Growth Metrics Every Entrepreneur Needs to Track
As an entrepreneur, growing your business is your top priority. Revenue and profit are important, but they’re not the only metrics you should be tracking. Understanding and tracking key business growth metrics can provide valuable insights into where your business is headed and help you make informed decisions to scale up. Here are the top 5 business growth metrics every entrepreneur needs to track.
1. Customer Acquisition Cost (CAC)
CAC is the cost you incur to acquire a new customer. This metric is crucial for startups to ensure they’re not overspending on customer acquisition. CAC is calculated by dividing the total cost of sales and marketing by the number of new customers acquired during a specific period. As you scale your business, you should aim to reduce your CAC over time. It’s a good indicator of your business’s marketing and sales efficiency.
2. Customer Lifetime Value (CLTV)
CLTV is the total revenue a customer can bring to your business over their lifetime. This metric is important because it helps businesses understand the value of each customer. Higher CLTV means more revenue and higher margins. You can calculate CLTV by multiplying the average value of a sale with the number of times a customer will make a purchase from your business over their lifetime.
3. Monthly Recurring Revenue (MRR)
MRR is the predictable monthly revenue that a business generates from its customers. This metric is important for businesses with a subscription-based model. MRR helps you forecast future revenue and determine the effectiveness of your marketing and sales efforts. To calculate MRR, multiply the number of active subscribers with the average monthly subscription fee.
4. Churn Rate
Churn rate is the percentage of customers who stop using your product or service during a specific period. Keeping your churn rate low is crucial for maintaining steady growth. High churn indicates that customers are unhappy or dissatisfied with your product or service. You can calculate churn rate by dividing the number of customers lost during a specific period by the total number of customers at the beginning of that period.
5. Burn Rate
Burn rate is the rate at which your business is spending money. Burn rate is important to track because it helps you determine how much cash you’ll need to keep the business running. When your burn rate is higher than your revenue, it means you’re losing money. You can calculate burn rate by dividing your total expenses by the number of months you can run the business with your available cash.
Conclusion
Tracking these key business growth metrics can provide valuable insights into the health of your business and help you make informed decisions to scale up. As an entrepreneur, you should be tracking these metrics regularly to stay on top of your business’s growth and make strategic decisions. Remember that these metrics aren’t the only ones you should be tracking, but they’re a good starting point for any entrepreneur looking to measure their business’s success.
