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Understanding the Metrics of Your Business: What Does All of That Data Mean?

The business of understanding your business is known as metrics – measurements of various data that help you see what is happening with your company and make decisions for the future. Karola Karlson writes, “Running a successful business requires a thorough analysis of the work, sales, and financial results. And it can’t be done without tracking relevant business metrics.” They are nearly two dozen major business metrics that provide important information about your business. But, what are some of the key ones that you need to pay attention to?

Sales Revenue

Sales revenue is paramount to the success of your business. It is the measurement of income from products sold or services delivered. Revenue proves that people are interested in your product or service and are willing to spend money to get it. Obviously, your business’s goal is to maximize sales revenue, but you want to do this without alienating your customer base by raising the costs higher than what they are willing to pay.

Cost to Acquire Customers (CAC)

This metric isn’t as talked about, but it is very important. Cost to acquire customers, also known as customer acquisition cost, is the measurement of how much money your business spends to get customers – particularly each individual customer. It’s important to know the monetary cost of getting a client. This includes marketing, salaries, and overhead. Once you know this number, you can determine whether the effort you put into gaining customers gets a good return on investment with sales and income.

Net Profit Margin

Sales revenue is one thing, but net profit margin is the key metric for seeing whether your business is solvent and actually has a future. You find net profit margin when you take sales revenue and subtract the cost of producing your products and services. Net profit margin is the free money that you can put in the bank and don’t have to use to pay bills, pay for supplies, pay salaries, or other overhead costs. Net profit margin is money that you can take and reinvest in other business ventures.

Revenue Percentages

Revenue percentages are important for businesses that have multiple segments of products or services. You need to know which products are bringing in the cash and which products are a drag on your business. Having multiple sources of income is great – it gives your business multiple opportunities to make sales, and when one product or service is not doing great, another one might be – but you need to be aware of which ones your business is really relying on to thrive.

In closing, getting a handle on these metrics is important. It’s like a medical checkup for your business. You need team members who know what the terms above and others really mean. Big data courses can be a part of training your staff to read, understand, and engage with business metrics. Knowing the true financial and performance standing of your business can help you improve in ways you’ve never imagined.

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