Thursday, April 18, 2024
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12 Metrics That Tell You If Your Startup Is Healthy 

Running a successful business requires measurement. You need to know how well you are performing at any given time so that you can stamp out weaknesses before they impact your bottom line. You also need them to plan out your strategy, make new sales and ensure that your brand has a future. 

Figuring out which metrics you should be collecting, through, is a challenge. There are literally hundreds that you could track, all of which tell you something slightly different about your enterprise. 

In this post, we take a look at some of the metrics you should use. These statistics tell you about the health of your business so you can make changes, if necessary. 

Lead Response Time

Lead response time tells you how long your leads have to wait before a sales rep from your company contacts them. Ideally, you want lead response times to be as short as possible so that you can intercept prospective customers at the precise moment they’re considering purchasing from you.

Brands with a small lead response time have what industry experts call “a closing culture.” It’s the idea that your business is always looking for opportunities to strike deals and doesn’t take a half-hearted approach. Adopting a closing culture can dramatically boost business revenue and help to break the sales cycle. 

Sales Win Rate

Your sales win rate is the number of sales you win as a percentage of the total number of sales opportunities contacted, multiplied by 100 to give a percentage. For instance,if you make 200 sales in a month and contact 1000 customers, then your sales win rate is 20 percent. 

If your sales win rate is low – say less than 10 percent – then there are a number of things that you can do to revamp them. For instance, you might fire underperforming sales executives, provide additional training, or improve your sales pipeline processes. 

Yearly Sales Growth Rate

Tracking your yearly sales growth rate gives you an indication of how your company is performing over the long term. Once you have about five years of data, you should be able to see a trend emerging. Naturally, you want your sales growth rate to be as high as humanly possible so that you can bring your brand to scale. 

To calculate sales growth rate, subtract last year’s sales from current year sales, divide by last year’s sales, and then multiply by 100. This will give you a percentage increase from year to year, based on your sales figures. 

Customer Retention Rate

Your customer retention rate is the percentage of customers who continue to do business with you over time. There are different ways of calculating this metric, but most companies do it on a yearly basis. For instance, they take the existing number of customers minus the customers at the start of the year, divided by the number of customers at the start of the year, multiplied by 100. 

When customer retention rates are high, it means that people are satisfied with your services. Furthermore, it also allows you to cut your marketing costs. Holding onto existing customers is much cheaper than trying to go out and find new ones. 

Employee Net Promoter Score

Brands are only ever as healthy as the people working for them. If your staff isn’t happy in the workplace, then it will make it more difficult to recruit, and the quality of your output might fall. 

For this reason, many companies keep track of their employee net promoter score (eNPS). This is a measure for the degree to which workers are ambassadors for the firm, telling other people how great it is. The higher the score, the more likely you are to hold onto staff and have a positive company culture. 

Average Customer Revenue

Ideally, you want to make as much revenue per customer as you possibly can. That’s because it is often considerably more lucrative to upsell than it is to reach out to new clients. 

You can calculate average customer revenue by dividing total revenue by the total number of customers that you have. For instance, if you have fifty customers and you make $50,000 in revenue from them, then your average customer revenue is $1,000. 

Average customer revenue isn’t a dynamic metric. However, you can bookend the data you use to make the calculation. For instance, you could look at your average customer revenue in 2021 and compare it to what you’re now making in 2022. 

Customer Lifetime Value

Customer lifetime value is another popular metric that you might want to explore. Again, the idea is pretty simple: it’s just the amount of money you expect a customer to spend with you over the course of their lives, multiplied by the retention rate, divided by one plus the discount rate you apply. The discount is necessary because the value of revenue in the future is less than the value of revenue today. 

Gross Profit Versus Net Profit

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Gross profit versus net profit is a great way to compare how your revenues are stacking up against your margins. 

Most industries will have a standard ratio between the two. For instance, net profit might be around 10 percent of gross profit. By calculating this statistic, you can get a sense of whether your business is in the right ballpark or not. If net profits are too low compared to gross profits, then it might suggest an issue with your expenses. 

Accounts Receivable

Some brands like to keep track of their accounts receivable: the amount of money other businesses owe them. Usually, accounts receivable remain at the same level for long periods. However, in some cases, they can spike. 

If your receivables go up too much, it can be an indication that you’re in for a cash crunch. You might not have sufficient money in the bank to pay your suppliers and staff, even if your overall business is healthy. 

To improve your receivables, approach your customers and find ways to get them to pay you quicker. Ask long-term clients to set up recurring monthly subscriptions. 

Social Media Engagement

Social media engagement is a measure of the degree to which your audience is interested in your business. Having a million followers with zero engagement won’t get you very far in business, and certainly won’t help you build your brand. 

To measure social media engagement, you’ll want to track things like page views, visibility, impressions and more. Brand interactions like these can help you achieve your marketing and sales goals. 

Email Open Rate

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You’ll also want to keep a close eye on your email open rate. This gives you a sense of how much value you are providing your clients, and how engaged they are with your brand. It also tells you whether your headlines are effective at drawing people in. 

To calculate your email open rate, divide the number of emails opened for a particular campaign by the total sent and then multiply by 100. 

Conversion Rate

The conversion rate tells you the percentage of people who land on your website who actually buy from you. Mostly, it relies on the quality of your website and your ability to create effective sales channels that successfully get people to spend money at the checkout.

Allied to this, you might also want to track the click-through-rate. This is valuable for driving smooth conversions for your customers. All of the functionality should be there to support them and make sure that it is easy for them to buy from you there and then. 

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Jennifer Evans
Jennifer Evanshttp://www.b2bnn.com
principal, @patternpulseai. author, THE CEO GUIDE TO INDUSTRY AI. former chair @technationCA, founder @b2bnewsnetwork #basicincome activist. Machine learning since 2009.