Accurately tracked financial metrics provide benchmarks, demonstrate growth or stagnation and can highlight key opportunities and new goals for growth and success.

Every business is unique, but our extensive experience in working alongside businesses of all sizes and in every sector means that we’ve seen what’s important for most business owners and stakeholders to know in order to best take the company forward. 

In this article, we look at some key metrics to track and why they are important. 

Gross and net profit margins

Understanding the profit you make on your products and services after direct production costs have been taken off is important, as is keeping in mind the figures after all associated expenses and deductions, including tax, to get an accurate picture of your profitability. 

Customer acquisition cost (CAC)

The cost per customer acquisition is an important metric for many businesses as it helps to evaluate the effectiveness of your marketing and sales strategies. It can help to highlight which areas of your strategy are performing best and provide you with a tangible ROI when paired with the average revenue that each customer brings to the business. 

Divide the marketing and sales spend in a specific period by the number of customers acquired in that period to calculate and benchmark your CAC. When testing different marketing and sales tactics, you can use your original CAC benchmark to help evaluate success. 

Customer lifetime value (CLV)

While average order value is an important metric, understanding the average value of the entire relationship with a customer is essential as it helps you to measure the long-term revenue they bring to the business through repeat purchases and/or referrals. It can help you decide on how much time and resource you should dedicate to retaining existing customers vs the focus on new customer acquisition. 

Cash flow (operating and free)

Ensuring that your business is generating enough cash to meet your operational needs is essential, as is understanding your surplus (if any) so that it can directed in the most appropriate way for your business at that time. That could be areas such as investing in growth, boosting cash reserves or paying off debt. 

Debt ratios

It’s very normal for many businesses to be carrying debt, so it’s essential to have an understanding of how that debt is being serviced and what that means for your business, including how much of the revenue you are generating is being used for that purpose. Breaking this down into a percentage will give you a current debt ratio.

Debt recovery status

Something that can have a big impact on cash flow is when expected payments don’t come in on time, or even at all. Understanding how much you are owed at any given time is essential information for any business. Monitoring this over time can help show you how effective your credit control and debt recovery provision is performing too. 

Market share

Operating in a competitive market means that you need to keep a close eye on your company’s position within that market and the share you hold, along with keeping an eye on what your competitors are doing. Divide your own sales revenue by the total sales revenue in your market to calculate your current market share. 

You can use this benchmark to help measure growth in your market share over time.

Assistance with your financial metrics and insight

This list isn’t exhaustive. Every individual business will have its own financial priorities and circumstances. Professional specialist advice on your business finances can be invaluable and help ensure you base decisions on accurate information and data points that matter to your company goals and objectives. 

Our team would love to help your business, whether that’s with helping you to determine the right metrics in your specific situation or delivering the financial information and insights that you need. Get in touch to find out more.

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