When you have just started a business, it’s challenging to understand whether it’s growing in a positive way or not. A lot of times, entrepreneurs get fooled by seeing their vanity metrics growing at a steady pace.
In doing so, they tend to forget that vanity metrics are only those metrics that make your business look good to others. In a true sense, these metrics don’t give you a real insight into how your business is doing. These metrics often end up masking real performance.
So tracking your vanity metrics can lead you to the delusion of high performance, which can ultimately lead you to the wrong path and cause negative consequences for your business in the long run.
That’s why it’s important to know which metrics to track to understand the true status of your business. In this post, we’ll talk about a few important growth metrics that every business should track.
So let’s get started.
1. Customer Acquisition Cost
One of the most important metrics that every business should track is its Customer Acquisition Cost(CAC). Tracking this metric is important to understand how successful your marketing efforts have been.
By understanding the Customer Acquisition Cost of your business, you can easily identify the ROI of your marketing and sales efforts. It’s a very good way of having a better understanding of how effective your marketing strategy is. If your CAC is high, you need to know that your marketing strategy needs to be upgraded.
Now the question is, how do you calculate your CAC? Doing that is super easy. All you have to do is to add up the monthly marketing expenses, including the salary of your marketing team, and then divide it by the number of new customers acquired in a given period.
For example, if you have spent $25000 in a month and you acquired 20 new customers in that month, that means your CAC is $1250
But how do you know if this CAC is good for your business? Every business has a different CAC benchmark. For example, for the travel industry, experts consider it to be $7. For technology on the other hand, it’s $395. So based on your industry, it can vary. Do some research and find out what a good CAC is for your industry.
2. Monthly Recurring Revenue
Another very important metric to track and consider is your monthly recurring revenue. This revenue is the total revenue generated by a business from its active subscription on a monthly basis.
Keeping track of this metric is especially important for businesses that run on a subscription model. It helps you identify the financial health of your business. So it’s important that you continue to grow this metric every month.
With this metric, you can easily predict what revenue to expect from your business at the end of a month.
If your monthly recurring revenue isn’t doing well, you need to invest in building better relationships with your clients or building trust and credibility amongst your users.
This can either be by improving your product or service quality, through improved marketing strategy, better outreach, etc.
3. Bounce Rate
In the world of digital media, almost every business has an online presence.
You, too, definitely have a business website through which you send out information about your business, attract leads, sell your products, grow your email list and do everything you need to boost your conversions.
The good news is that with Google Analytics, it has become a lot easier to monitor and track your website activities. You may have a lot of website visitors, but there’s no point in having them if you can’t retain them.
By tracking your website’s bounce rate, you can easily identify how long your visitors stay on your website. When you have a lower bounce rate, you know that your website is on the right track and is capable of retaining your visitors. But if this metric is high, you need to change your strategy immediately.
This can be through changing your landing page, using better quality images, changing your website content, etc.
Over to You
If you really want your business to grow, you need to focus on tracking those metrics that help you get a better insight into how your business is doing. It’s a very powerful way of identifying the mistakes, loopholes, ambiguities, and inadequacies in your business and improving them to get the desired results.
