By Solomon Thimothy, founder of Clickx
When I was growing my business, I struggled with knowing whether or not I was really making progress. Sometimes it felt like we were taking off faster than we could manage, while other times it felt like we were stuck. However, a gut feeling isn’t enough to truly measure the state of your business. To get an accurate read on how well your business is performing, you need to take a look at key performance indicators (KPIs).
As a business owner getting a company off the ground, KPIs can act as your lifeline. They let you know where you should be spending your time, where you should stop wasting your time and if you’re really making progress with your business growth.
There are a lot of different KPIs you can track. Here are some of the metrics I liked to keep my eye on when I was getting my business started.
1. Customer Acquisition Cost (CAC)
Your customer acquisition cost tells you how much money you’re spending to bring a new customer onboard. While it’s true you need to spend some money to make money, you also need to be sure that you’re spending money efficiently. If you’re spending more money than you’re ultimately making, your business can’t grow.
Customer acquisition cost is found by combining your marketing and sales expenses for a specific amount of time, divided by the total number of customers acquired during that time period. This will give you the average cost to acquire one customer.
Converting one customer is hard -- converting them a second time can feel even harder. However, getting repeat customers is important for growing your business. That’s why retention rate is one of my favorite metrics to look at.
Retention rate is the number of buyers who ultimately make a second purchase, or in the case of service industries with subscription models, those that retain their subscription for an additional month. Having a high retention rate shows that you’re connecting with the right audience members and that you’re giving them what they’re looking for. A low retention rate means there might be some disconnect between you and your target audience.
3. Month-Over-Month Growth
When you’re just starting out, you don’t have a lot of time to compare your growth. This is why I like to use month-over-month growth. Just looking at the month before can give you an idea of how well you’re growing, even without a lot of data.
Finding your month-over-month growth is simple. Simply decide what you’d like to measure, such as the number of users or revenue, and compare this month’s number to last month’s. You can even move back further, to compare this quarter to last. When measuring month-over-month growth, it’s important to consider what outside factors may influence growth, such as holidays or sales.
4. Revenue Growth Rate
One of the biggest challenges a new company can face is growing revenue. Revenue growth requires a combination of attracting new buyers while also retaining past customers, which can be a real struggle. However, revenue growth rate is incredibly important for a new business.
To find your revenue growth rate, take this quarter’s revenue and subtract it from last quarter’s revenue. Then, divide the difference by the total number of revenue from last quarter. Finally, multiply that number by 100 to get a percentage.
While these are great KPIs to get started with, each business will have a unique set of goals that they’ll want to keep their eye on. You should use these goals to identify which KPIs best fits your organization and team needs.
KPIs are also flexible. If you choose a KPI that doesn’t exactly match your needs, feel free to try something else, add a new metric or even make it more specific to find just the amount of detail you’re looking for. When you measure KPIs that align with your goals, you’ll move closer and closer to growing your new business.
Solomon Thimothy is the founder of Clickx, a marketing intelligence platform that helps businesses and agencies with marketing attribution.