THE 6 MOST IMPORTANT METRICS
What gets measured, gets done! Any goal that is set that does not have a way to know how close you are to obtaining that goal is merely a wish.
A business needs measurements or metrics so that you have indicators on how close you are to success.
When you know your numbers, the numbers treat you better. Below are key measurements around marketing that I feel every business should know so that business owners can make well informed decisions.
THE KEY MEASURES OF MARKETING
- Average Profit per Sale
- Average Number of Reoccurring Sales
- Cost of New Clients
- Cost of Prospects
- Percentage of Clients Who Become Clients
- The Marginal Net Worth of 1 Client
I didn’t want to overload you with too much information cause each one is important and deserves your full attention.
In the coming weeks I will breakdown what each of these measures mean, how to calculate them, and how to use them in your business.
WHY IS ROI IMPORTANT
- It answers fundamental questions regarding the allocation of resources.
- It will gain the attention of investors and other people who may want to fund your business.
- It can serve as a scorecard to measure your business’ performance.
Calculate your Net Profit for the year.
(Total Revenue – Total Expenses)
An Example – I made $30,000 (after taxes) after spending $20,000 this year. So my Net Profit is $10,000.
Add your Long-term Debt + Current Equity. These numbers can be found on your Balance Sheet.
Basically, together they represent what you have invested in the business (total Investment). Your money in the business plus money that you have borrowed.
For our example we noted I put spent $20,000 for the year. Now, assuming I have taken no Loans, and have not put any other money into the business. My total investment for the year is $20,000.
Divide Your Net Profit by the Total Investment.
In our example it is $10,000 divided by $20,000 which equals
.5 or 50% (.5 x 100)
And that is a simple way to calculate your ROI.
IMPORTANT TO KNOW
There are many ways to calculate the ROI of your business but this is the quickest to use as a tool to make sure your business is a sound investment for others to participate in.
Knowing your ROI is a great way to obtain funding. It gives potential investors and idea of what to expect and shows that you know your stuff.
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