The running of a successful business can’t be done on gut instinct alone. It requires you to thoroughly measure and analyse your sales process and financial results. In short, that means tracking the relevant metrics. The process of gathering and analysing your business growth metrics will give you a clear indication of what’s promoting conversions, repeat visits, customer retention, churn and other growth factors. My guide to planning an unstoppable growth strategy covers the key elements to focus on when measuring business growth.
If you fail to focus on the right growth metrics, your expansion plans could slow – or even grind to a complete halt.
Identifying the right business growth metrics is key
Growth metrics give you much more information than simply whether sales are improving or decreasing. They’ll enable you to identify:
● Which products/offers are generating the most revenue growth
● Which channels are affording you the most opportunity for growth
● Any weak links that may be hindering your growth
● The health of your business overall
● The right high-value markets to target for growth
● Which ad campaigns are delivering the most new customers or giving you the highest retention rates
● Which campaigns are delivering the highest ROIs
While there are hundreds of business growth metrics that can be tracked, many are simply ‘vanity metrics’ that may feel good to see growing but and are meaningless in regard to growing your business.
Metrics that show you measurable value towards reaching your business goals (KPIs) are the ones worth tracking. These include:
1. Sales Revenue
Ideally your revenue will grow year on year but, if revenue is not increasing as per your expectations you‘ll need to delve deeper and find out what’s happening. Are you targeting the right users or are you messaging them at the right time in the sales funnel? Does your pricing need re-adjusting?
You need to measure how much it costs you to generate a lead and whether that cost is justified by the subsequent conversion rate. Measure cost-per-lead by dividing your marketing and ad costs by number of leads generated over a specific time period. Ideally acquisition costs will fall over time as your campaigns become more optimised.
3. Overhead costs
Overhead costs are fixed costs e.g. rent and employee wages. These are ongoing costs and important metrics to track so you can see how much of your money is attributed to non-revenue generating activities. If your overheads are high you will need to find a way to reduce them e.g. moving to a less expensive office.
4. Variable costs
Variable costs include the costs of production which increase as volumes of products sold increase. Tracking this metric allows you to measure the expense of producing an item and scale up production, taking advantage of the economies of scale (i.e. seeing costs per item fall as you sell more).
5. Cost-per-customer (CPC) acquisition
Customer acquisition takes into account leads and conversions. If your conversion rate is for example 5% you need to generate 20 leads to get one customer. If it takes you £5 to generate one lead the cost per acquisition is £100. Your aim is to ensure customer spend is as high as possible compared to their acquisition costs. In this case well in excess of £100.
6. Customer Retention
This is a metric that indicates your ability to keep customers coming back for more after you acquire them. It’s far more cost-effective to retain customers compared to converting new users. (Especially when, according to Hubspot, the cost of customer acquisition has risen 60%.)
Your retention rates also illustrate the strength of your customer loyalty as this can have a big impact on long term growth.
7. Customer Upsells
Revenue growth can be linked to the sales team’s ability to upsell to customers and clients. Upsell metrics enable you to see any missed opportunities when it comes to increasing revenue so you can improve your cost-per-lead.
8. Conversion Rates
A conversion occurs when a lead takes a specific action. This metric varies on what your company goals are and what you consider this action to be. Low conversion rates can be due to a shortage of quality leads, poor messaging, your sales team’s ability to convert leads, and other factors. These metrics are invaluable in determining where improvements need to be made.
9. Active Users
For many companies the user base is an important metric. It can give more valuable insights than total user metrics. What you consider an active user has to be clearly defined. Two metrics you might want to track are daily active users (DAU)s and monthly active users (MAU)s.
10. Customer Churn Rates
Churn reflects the number of users or customers dropping off in a specified period of time – or the amount of lost revenue due to them dropping off. This is a metric you need to keep a close eye on and address if it seems to be becoming an issue.
Tracking your business growth metrics is an essential step when it comes to creating a predictable revenue growth. However simply gathering and monitoring your data isn’t enough. If you want to sustain predictable business growth you need to put this data to good use. Growth metrics are just numbers unless you create insightful reports with them and use that information to plan for future growth.
To help you gather the right metrics,and identify stronger or weaker areas of growth you could consider using a third party marketing consultancy or analytics service. This would enable you to focus on the measures you need to take to grow your business more effectively.