You Won't Be Able To Make Business Decisions In 2023 Without This Data
How do you know if your business is growing?
The answer to all of your business growth questions is in your analytics.
Since the pandemic, I've been watching many more episodes of my favorite show, Shark Tank. Check out an episode or two for motivation on your next brilliant business idea pitch!
When entrepreneurs make their pitch, the most common questions asked by the sharks are about their business metrics.
I was inspired to write this blog post for new entrepreneurs looking to track their business growth more straightforwardly and possibly pitch in a competition or on a massive platform like Shark Tank.
You need data in real-time to tell you if you're on track and what you need to do to keep growing. These are the business metrics your team should be tracking.
Analytics
Modern technology makes it easy to track these metrics yourself without hiring a business analyst.
Google Analytics is a free tool that allows you to view and track your business metrics all in one dashboard.
You can use many other paid services, but honestly, Google Analytics is an excellent software to master first versus paying for something you have no idea how to use.
It's one of the easiest and fastest to set up! There are analytics you can track to measure business growth effectively.
If you aren't as tech-savvy, I created a tutorial that shows you how to do just that!
Customer Acquisition Cost (CAC) v. Cost Per Lead (CPL)
In simple terms, customer acquisition is the price per person, whereas the cost per lead is the price per potential customer. The customer acquisition metric is the cost of convincing customers to buy your products or services.
Like myself when I first started a business, you might be wondering why it's so essential to lower your customer acquisition cost.
My client spent $2,000 marketing dollars on the Q1 campaign and got 3,500 new orders.
$2,000 / 3,500 = $0.57 ← Customer Acquisition Cost
Simple formula = Marketing and Sales Cost/ # of customers
Formula = (Total Marketing + Sales Expenses) / # of New Customers Acquired
This information tells you how much your sales and marketing efforts are paying off.
At this rate, to get 10,000 new customers, it would cost $5,700. You could use this to predict your future business finances.
Return on Ad Spend (ROAS)
ROAS looks directly at the cost of advertising and the amount of revenue your business earns.
Looking at my same client, it cost her 57 cents per customer in the section above. Her customer acquisition cost was low, considering each unit sold for $25. That's good!
We know how much she spent on marketing but what was the return?
$87,500/ $2,000 = $43.75 ← Return on Advertising Spending
Simple formula = revenue/campaign cost
Formula = Revenue attributable to ads / Cost of ads
You can spend as much as you want on ads, but if they aren't profitable, you have an even bigger problem in your business.
Tracking metrics like these helps you assess your progress. It gives you a comprehensive picture of what's working well for you and shows you where you can improve.
If you want to see growth, you should create a strategy for achieving them. You can then make minor changes if you do not see the results you want.
The number 1 rule of thumb is to promote your products and service organically first. Then you should create ads only if the post does well organically.
That's not to say you should not create ads at all, but I've found this to be the best way to save money for the clients.
Return on advertising spending tells you whether your advertising spending is paying off or not. If it's not, then you'll need to consider more effective or less expensive methods.
Customer Retention Rate v. Churn Rate
We've all heard of retention rates. It's usually about schools tracking how many students they have retained for the following year.
Businesses also have customer retention rates that tell you what percentage of your customers stay with you and purchase again.
Although the customer retention rate and the churn rate have some similarities, these two metrics account for different aspects of your business growth.
If your rate of retention is low, your business is losing money. Low customer retention is a warning sign that you need to step up your efforts to engage and offer value to your audience.
Your churn rate is the opposite. It shows how many customers you lost in a period. If I started Q1 with 1000 new students, but by Q4, I lost ten students, my churn rate would be 1%.
It costs much more to gain new customers than to keep existing ones. Your current customers are the most significant source for growing your business.