In the quest for business growth, entrepreneurs are often advised to keep a close eye on key financial metrics. We’ve gathered insights from co-founders, CEOs, and other leading executives to uncover the one metric they believe is crucial. From monitoring CAC for growth to diagnosing issues with churn rate, explore the fifteen diverse perspectives on driving business success.
- Monitor CAC for Growth
- Prioritize Lifetime Customer Value
- Track Cash-Flow Against Expenses
- Watch Operating Cash Flow Ratio
- Focus on Profit and Expense Management
- Shorten Sales Cycle Length
- Keep an Eye on Burn Rate
- Forecast Cash Flow for Sustainable Growth
- Measure Return on Advertising Spend
- Track Subscription Delta Monthly
- Assess Net Margin and Quality Metrics
- Optimize for Conversions
- Increase Net Profit Margin
- Understand Gross Margin Impact
- Diagnose Issues with Churn Rate
Monitor CAC for Growth
In my journey with Profit Leap and the development of Huxley, the AI Business Advisor Bot, one financial metric that stands out for its impact on driving business growth is the Customer Acquisition Cost (CAC) coupled with the Customer Lifetime Value (CLV). CAC provides invaluable insights into the efficiency of marketing strategies and their direct outcome on attracting customers. Simultaneously, CLV casts light on the long-term value of these efforts by revealing how much a customer will contribute to the business over their relationship.
A tangible example of this was when we leveraged Huxley to optimize our marketing strategies, significantly reducing our CAC. By deploying targeted digital campaigns and refining our messaging based on precise customer data, we observed a hearty reduction in the cost to acquire new customers. Moreover, by nurturing these customer relationships and enhancing the quality of our service, we saw a notable increase in our CLV. Customers weren’t just making a single purchase; they were returning again and again, fostering a thriving environment for sustainable business growth.
Furthermore, by analyzing ratios between CAC and CLV, we’re able to pinpoint the sustainability of our growth strategies. This symbiotic relationship between the cost of acquiring a customer and the value they bring over time is crucial for any entrepreneur looking to not just grow but to do so efficiently and sustainably. It illustrates the importance of not only attracting new customers but also retaining them to maximize their lifetime value, all while keeping acquisition costs in check. This balance is fundamental to driving robust business growth with long-term viability.
Russell Rosario
Co-Founder, Profit Leap
Prioritize Lifetime Customer Value
The one financial metric we prioritize as a marketing agency is the lifetime customer value of our clients. We recognize the cost of acquiring customers, and it is our job as entrepreneurs to ensure that we grow not only in terms of how many clients we can handle but also in how much we can offer and provide for them. We are always looking for ways to increase our lifetime customer value by diversifying our services and making every experience as pleasurable as possible.
Munir Alsafi
Co-Founder, VixelStudio
Track Cash-Flow Against Expenses
The one metric I would recommend entrepreneurs monitor (especially if the business is new) is your cash-flow metrics in comparison to your expenses. Profit and loss is great, but in the early days of your business, cash flow is the silent killer. You most likely won’t have a mountain of spare cash lying around, nor will you have any backed investment, meaning what you get in each week is all you have to keep things moving.
As it’s easy to focus on profitability, your balance sheets might look promising, but if you fail to monitor cash flow, you could sink your business. Understanding and monitoring this metric will allow you to point out areas of weakness in your transactions/sales process. Setting up your cash-flow systems and processes early will only benefit your business’s growth going forward.
Phil George
CEO, Mentorcliq
Watch Operating Cash Flow Ratio
Without a doubt, one financial metric entrepreneurs should keep a close eye on for driving business growth is the operating cash flow ratio. It gives you a clear picture of how much cash your business is generating from its day-to-day operations to cover expenses and debts. And you’re absolutely right—keeping your accounts receivable and payable aligned is crucial for maintaining a healthy cash flow and keeping your business running smoothly.
Late payments can throw a wrench in the works, which is why tapping into modern payment solutions that offer instant payments can be a real lifesaver. They streamline transactions, making cash flow management easy and freeing you up to focus on growing your business.
Nick Chandi
CEO & Co-Founder, Forwardly
Focus on Profit and Expense Management
One of the main financial KPIs anyone running a business should look at is profit. It might seem like the simplest answer, but I cannot tell you how many times I’ve spoken to other founders and entrepreneurs running their businesses. All happy they’re running a $100K/PM business while they’re working with 10% margins.
Make sure to always track your KPIs every single month. Put some time aside to see where you’re spending your dollars. Are they making you more money? Are they a necessity? If not, cut those expenses and increase your profit margins.
Zachary Bernard
Founder, We Feature You PR
Shorten Sales Cycle Length
Look closely at the sales cycle length. Velocity is key, and the faster you can close deals, the more deals you can manage, making up for a low conversion rate or deal size.
Corey Schwitz
CEO & Founder, Skydog Ops
Keep an Eye on Burn Rate
The most important financial indicator that business owners need to monitor is the “burn rate.” It’s similar to monitoring your rate of expenditure. This measure indicates the rate at which your company is depleting its cash on hand. By keeping an eye on your burn rate, you can determine whether your expenses are in line with your income and whether you need to make any changes to stay afloat.
In my experience, keeping a careful eye on the burn rate has made it easier for me to make wiser financial decisions for my company. It’s similar to making sure you don’t run out of gas in your automobile by monitoring the fuel gauge. If I know how much money is being spent each month, I can more effectively allocate resources and make better plans for future costs. This knowledge has helped me identify areas where I can make more strategic investments or minimize expenditures, which has been essential in fostering corporate growth.
Kartik Ahuja
Digital Marketer, kartikahuja.com
Forecast Cash Flow for Sustainable Growth
One of the key financial metrics is cash flow forecasting. Focusing on overall sales growth or gross margin for planning growth is important. However, cash flow forecasting is critical as it ensures that the growth plans are sustainable and don’t land the business in trouble when funding new initiatives.
Barkan Saeed
CEO, Vizteck Solutions
Measure Return on Advertising Spend
In my work at SEM by Design, focusing heavily on local SEO, reputation management, and paid advertising, I’ve discovered that the Return on Advertising Spend (ROAS) is a critical financial metric for entrepreneurs to monitor to drive business growth. ROAS measures the revenue generated for every dollar spent on advertising. It’s a straightforward yet powerful indicator of how effectively your advertising strategies are contributing to your business’s overall growth.
For instance, working with a local bakery, we shifted their advertising spend towards more targeted local SEO strategies and carefully managed Google Ads campaigns, ensuring we were reaching the right demographic. This approach not only reduced their overall advertising expenses but significantly increased their sales. As a result, their ROAS improved dramatically, showcasing a direct correlation between targeted advertising spend and business growth. This experience underscored the importance of not just spending on advertising but spending smartly.
Moreover, by continuously monitoring and adjusting our strategies based on ROAS outcomes, we’ve enabled businesses to pivot quickly in response to what works best for their target market. This metric has been indispensable in making informed decisions, allowing our clients to allocate their budgets more effectively and achieve sustainable growth. Entrepreneurs should embrace ROAS as a dynamic compass that guides their advertising investments towards the most profitable channels, ensuring their resources yield the highest returns for business expansion.
Steven Morse
Owner, SEM by Design
Track Subscription Delta Monthly
For businesses that have recurring memberships, the “Delta” is the best metric to track. The Delta represents the net difference in month-over-month subscription dollars.
For example, if you gain $2,000 in new subscriptions and have $500 in canceled subscriptions, then your Delta is $1,500. When you have sequential months of a positive Delta, then you know things are going well. Starting to see a trend of negative Deltas, or a decreasingly positive Delta? Then you need to reassess and make some changes.
Debra Hammett
Managing Partner, Serious Results LLC
Assess Net Margin and Quality Metrics
Net Margin is the obvious immediate financial metric to monitor, which gives you the clearest sense of your success. If you’re not making a profit, what’s the point of the business? However, the fallacy is in thinking that financial metrics are the key to driving business growth. They aren’t. They are merely numbers that tell you how other numbers are doing in comparison—whether you make more money than you spend, and what you spent it all on. All are worthwhile endeavors, but they don’t drive business growth.
Quality and the value you deliver drive business growth. Good work wins good work. Building metrics to evaluate your quality is key. These could be in the form of OKRs, pricing strategies based on success or value, return rate, win rate, and evaluations such as Net Promoter Scores or similar of your clients and their experience with you—likely a combination of these.
Then, measuring for yourself whether you do something about the results—your level of action in learning and driving an impact. I am a partner at a national consultancy firm of over 500 people, having built a business line from the ground up 5 years ago within the firm, to what is now a 50-strong, $16 million business, and have just acquired another business which will double our size and footprint. I know the gravitational pull to monitoring revenue and profit, but also where success and growth truly come from.
Jason Perelson
Partner, Synergy Group
Optimize for Conversions
At the end of the day, I firmly believe that everything comes down to conversions. It’s how well you optimize all the processes to produce a vehicle that will convert your offer or sell your product the best. Since I have been working in the SEO industry for quite some time, I can tell that many people get stuck with unimportant vanity metrics such as organic traffic and clicks.
Don’t get me wrong; those are important in some way or another, but they won’t sustain your business and allow it to thrive. If you don’t convert and sell, you don’t become profitable. If you aren’t profitable, there is nothing left on the table that allows you to continue working as hard and thoughtfully as possible on your business.
Jason Vaught
President, Equipping Entrepreneurs
Increase Net Profit Margin
One key financial metric for driving business growth is net profit margin. It shows how much profit you keep after expenses. A strong margin means more money to reinvest in expanding your business. Track this closely, and look for ways to increase it through better cost management, strategic pricing, and boosting sales of your most profitable products/services.
Krishna Bhatt
Chief Executive Officer, Webuters Technologies
Understand Gross Margin Impact
One financial metric that I consistently emphasize to entrepreneurs, both in my lectures and in my professional advice, is the gross margin. Monitoring and understanding gross margin can offer profound insights into your business’s financial health, providing a clear view of profitability excluding direct costs associated with producing your goods or services.
From my experience, especially during my tenure as a Relationship Manager and OIC at major banks, I’ve seen many businesses, ranging from startups to established corporations, overlook the nuanced value of tracking their gross margin. However, those who do focus on it often uncover opportunities to optimize their pricing, manage costs more effectively, and ultimately drive business growth.
For example, I remember helping a small retail business that was having trouble growing. It wasn’t immediately clear, but after delving into their gross margin research, we discovered that some product lines were much more profitable than others. This realization helped the company refocus on these higher-margin products and services, reduce inventory, and strengthen relationships with suppliers—all of which contributed to a significant rise in total profitability.
For this reason, I urge business owners to have a deeper comprehension of their gross margin by going beyond measurements that are at the surface level. It’s more than just a figure; it’s a potent signal that may direct pricing plans, influence strategic choices, and draw attention to cost-cutting opportunities—all of which are essential for long-term, profitable company expansion.
Jocarl Zaide
Chief Financial Officer, SAFC
Diagnose Issues with Churn Rate
I always tell entrepreneurs to focus on churn. While you can reduce operating costs or marketing budgets, churn shows that there’s an underlying problem—or problems—your customers aren’t sharing. It’s a metric that leads you to constantly diagnose the entire value chain and ask customers where you’re failing.
Justin Abrams
Founder & CEO, Aryo Consulting Group
