5 Growth Metrics Every Entrepreneur Should Track

#1. Gross Profit Margin

The Gross profit margin (GPM) measures the difference between revenue earned and the cost of production or goods. The GPM is expected to be fairly stable over time and a huge fluctuation in the margin could mean either the expenses are too high or the sales are too low. Of course, it could also be a positive indication of more sales at a lower cost of production. In that case, you could use the GPM to identify high-margin products which of course should become the target of your marketing campaigns. 

#2. Customer Acquisition Cost (CAC)

How much does it cost your business to gain a customer? The customer acquisition cost takes into account the cost of marketing and sales, salaries, cost of procuring equipment, and overhead expenses involved in getting new customers. If your CAC value is low but effective, then it is profitable. On the other hand, if you have a high CAC value but a low customer acquisition rate, then you need to change your marketing model. Since a company can have different marketing channels, this metric can be used to track the performance of each channel to see which ones are performing well and which ones are not. 

#3. Customer Churn Rate

Next to customer acquisition cost is the customer churn rate. After spending so much to get a customer, there is still work that needs to be done to retain the customers. Customer churn rate shows the rate at which your startup is losing customers at any given time. If the rate is low, it means that your business is retaining most of its customers but if the rate is high, it means that your business is losing most of its customers. Customer churn rate is most important to startups with a subscription model and B2B companies that are customer-centric. This is not to say that startups with a different business model should neglect this metric since it indicates how satisfied their customers are. 

#4. Burn Rate

You might not be a financial expert but this is one financial concept you need to know. Burn rate measures how fast your startup is spending the money available. In essence, how quickly are you cutting through the paychecks of your investors or even your savings? With most startups failing as a result of insufficient funds, it would be a smart choice to follow the credit–debit column of your cashbook closely. To answer the question, how long can my business survive with the available funds, the answer can be found by calculating the burn rate.

#5. Return on Investment

This is a growth metric that takes into account the future worth of an investment relative to its cost. A positive ROI means that your investments are bringing in more revenue than they cost. A negative ROI means that you’re spending more than you make on any given investment. Although ROI is a simple way of determining how profitable an investment is, some factors must be considered when evaluating the ROI of an investment. These include risk tolerance and time. A startup with limited capital may have a lower risk tolerance than an established business. This would be reflected in the type of investment they are willing to undertake. Also, startups are time-conscious and an investment that promises a high ROI but takes a longer time to achieve may not be at the top of their priorities. 

10 Tough Questions To Answer Before Starting A Business

1. Is it a good time?

2. What problems will my business solve?

3. Can I handle the changes this will bring to my lifestyle?

4. Do I have the resources and if not, how do I get the resources I need?

5. How long will I stick it out if things don’t go as planned?

6. What is my Plan B?

7. Can I give up my career for my Business?

8. What is my strategy?

9. What is my exit plan?

10. What if I fail?

Learn how to turn fear into an advantage in your business;

That’s all for now folks.

Until next time, stay inspired and keep chasing your dreams!

Cheers,

Alex