Carlson Thought Leadership in Finance & Technology

The 7 Most Important Metrics to Track in Business

April 19, 2018 / by Lauren Strohmeier

Carlson Blog Post

To build a high-growth company that thrives in the long-term, it’s essential to identify and manage key metrics. These metrics act as your roadmap, guiding you to the future you envision. In a data-driven company, you are able to set smart strategies and make actionable goals happen.

Here’s how to get a more focused view of company performance.

Sales Revenue

Sales revenue is a fundamental gauge of how well your products and/or services are selling. It’s the amount of money brought into the company from the sale of products and/or services during a specific time period. To boost profits, you’ll need to increase your sales revenue (or reduce expenses).

To identify any trends or fluctuations, examine the amount of revenue your company has generated year over year, quarterly or even monthly. This will provide insights on changes in demand. See a decrease? Identify the cause and form a strategy that corrects the course. See a rise? Form a strategy that stays the course or brings in more sales. A visualization of revenue over time is a very effective way to spot trends. Adaptive Insights’ Discovery module is an ideal platform for visualizing data and making it easily understood, particularly by stakeholders outside the finance department.

Customer Loyalty

Measuring customer loyalty is vital to a company’s growth. After all, customer loyalty is an indicator of satisfaction. Satisfied and happy customers are more likely to be loyal. And, loyal customers are more likely to be repeat customers and brand ambassadors.

By measuring loyalty, you can identify how invested your customers are in your brand. What’s the best way to measure loyalty? Gather information by administering customer surveys, requesting feedback, and/or analyzing purchase trends. With those insights, you may decide to increase customer loyalty. Consider creating a customer loyalty program. This program rewards, with special offers, people who make frequent purchases. Most importantly, your company must have a compelling mission it upholds. The company that stands for a meaningful cause will likely resonate with its customers and have ardent brand supporters. 

Customer Retention

Customer retention is another important metric to track. Specifically, it looks at how well a company is keeping its customers over a period of time. When you have high customer retention, many of your customers are buying from your company repeatedly or renewing agreements they have with you. If you want to improve retention, develop programs that reduce churn and increase revenue. This is particularly important for companies with recurring revenue models like software, advertising, media, telecommunications, and others.

By measuring loyalty and retention in tandem, you’ll know how customers feel about your company. With that knowledge, you can create compelling experiences that make your customers more happy and loyal.

Customer Acquisition Cost

How much does it cost for your company to gain a new customer? On a high level, when you add all marketing expenses and divide the sum by the number of customers you acquired over a period of time, you’ll have your customer acquisition cost (CAC). You can get more granular if you run specific campaigns and track CAC by those activities. This is a key metric because it’s essential to know your revenues  are covering costs and providing adequate margin.

Measuring CAC is an effective way to optimize the return on investment (ROI) of your marketing campaigns. It’s also wise to measure CAC for every marketing channel. If the cost is too high for a specific channel, consider reducing it to maximize profits. If the cost is too low, consider allocating a greater portion of your budget to that area.

A good way to improve ROI is to reduce CAC strategically. In which areas can you save money? Ideally, your marketing spend should optimize company performance. The goal is to make the highest profit at the lowest cost.

Customer Lifetime Value

Want to know the total net profit each customer brings in during their lifetime? Calculate the customer lifetime value (CLV). Expressed in dollars, it’s the total amount each customer brings in with their purchases during the business-customer relationship.

By calculating CLV, you identify the most profitable customers who contribute to your company’s long-term success. You can then develop strategies that keep your customers happy. The characteristics of your profitable customers can also help you create personas for customer acquisition campaigns. This helps you attract similar customers who will bring in the most profits for your company.

Cash Flow

As the finance professional knows, cash flow plays a crucial role in financial management. Cash flow represents the net cash flowing in and out of your company on a monthly basis. The cash flowing into your company includes customer purchases and other revenue streams. Meanwhile, the cash flowing out of your company includes operating expenses, such as payroll, utilities, rent, and taxes.

Unless you are an early stage company, more cash should flow into, than out of, your company. To analyze cash flow, run a cash flow report. Adaptive Insights offers reporting capability so that a cash flow report can be generated quickly and shared with stakeholders. By comparing the numbers, you can determine which areas of your company require adjustment. You can also make connections between cash flow and changes in business activities.

Operational Efficiency

Operational efficiency is the comparison between a company’s output and input. What’s the input? It’s all resources that go into producing your products and/or services. What’s the output? It’s the products and/or services your company produces. Measuring operational efficiency helps you get the greatest returns from your business investments.

With Data, Comes Strategic Perspective

Of course, there are additional metrics that provide financial clarity. When you evaluate these numbers together, you’ll set your sights in the right direction. In a data-driven company, you have the perspective it takes to thrive.

Want to get a picture-perfect look at your company’s performance? Measure key metrics with the help of leading technology solutions like Adaptive Insights. Request a personalized demo today.

 

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