As a growing business, it's essential to monitor and track various key performance indicators (KPIs). This is crucial in assessing the performance of your business, determining the areas that need improvement, and making informed decisions.
While there are various KPIs that businesses can track, some are more pivotal than others. In this blog post, we'll discuss five essential KPIs that growing businesses should track to measure their progress and make informed decisions.
Monthly Recurring Revenue (MRR)
MRR is a crucial KPI for growing businesses, particularly those in the Software as a Service (SaaS) industry. It measures the predictable revenue a business expects to earn from its customers every month. With MRR, businesses can measure and forecast their future revenue streams, which is crucial in making informed decisions about growth and investments.
Customer Acquisition Cost (CAC)
CAC is the cost incurred to acquire a new customer for your business. This takes into account marketing, sales, and other customer acquisition expenses. It's an important metric because it determines the efficiency of your sales and marketing efforts. By regularly monitoring your CAC, you can identify the channels that bring in the most profitable customers and optimize your acquisition strategies accordingly.
Customer Lifetime Value (CLTV)
CLTV measures the total worth of a customer to your business over their lifetime. This includes all the revenue they generate, including referrals and repeat purchases. Tracking CLTV enables businesses to optimize their customer retention strategies, identifying ways to keep their customers happy and engaged.
Gross Profit Margin (GPM)
GPM measures the profitability of a business's sales. It's calculated by taking the total revenue from sales minus the cost of goods sold (COGS) and dividing it by total revenue. Businesses should aim to increase their GPM over time by reducing their COGS and optimizing their pricing strategies.
Net Promoter Score (NPS)
NPS measures how likely a customer is to recommend your business to a friend or colleague. It's calculated by asking customers to rate their likelihood of recommending your business on a scale of 0-10. Scores of 9-10 are promoters, 7-8 are passive, and 0-6 are detractors. By tracking your NPS, you can identify areas of improvement to increase customer satisfaction and loyalty.
As a growing business, tracking these essential KPIs can help you measure your progress and make informed decisions. By monitoring your MRR, CAC, CLTV, GPM, and NPS, you can identify areas of improvement and optimize your strategies for growth. Remember, regularly reviewing your KPIs is crucial in maintaining a healthy and growing business.