Let’s face it, running a small business is challenging but exhilarating! There are many initiatives that need your focus and many others that take your attention. When it comes to Key Performance Indicators (KPIs), there are many that you need to know and understand, but here are 5 to really focus on when just getting started:
1. Cost per acquisition (CPA)
With limited budgets, knowing where to focus your marketing dollars is critical. Spending on the right media is essential. Therefore, knowing your CPA will help you focus your limited dollars.
For help calculating your CPA, check out ClickZ
2. Customer churn
Do you know how many customers are repeat customers? Keeping customers is far more cost-effective than acquiring new customers. While you need both for a business to thrive, you need to focus some attention on keeping customers. Churn measures the percentage of customers that leave during a given period of time.
While there are different ways to calculate churn, check out Churn-Rate 101 to get you started.
3. Customer Satisfaction Index (CSI)
While there are different inputs to calculate a CSI, companies should be looking at what is important to their business and to their customers and ranking that performance. For example, you may consider response time, safety messaging, and transaction accuracy as your top areas where you wish to measure customer satisfaction.
A CSI is a great way to take a pulse of customer experience and learn what areas of the business may need improvement.
To learn more about CSIs, check out the American Customer Satisfaction Index.
4. Lifetime Value (LTV)
If a picture is worth a thousand words, LTV is worth much more. LTV estimates the value of customer-worth to your company. For example, if you charge a monthly subscription or maintenance fee, you will want to find out how long the average customer will actually be a customer.
To calculate LTV, check out this article on Entepreneur.com
5. Operating Cash Flow
The operating cash flow ratio is one of the most important cash flow ratios. It is a clear indication of how money moves into and out of the company and how the company pays its bills. Understanding your cash flow will help you understand just how liquid your business is and how quick you can move.
These of course are just five of the many business KPIs that are important to a business, but they are great ones to think about when just starting out.
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