The 5 Most Important Metrics For Your Business
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The 5 Most Important Metrics For Your Business

The 5 Most Important Metrics For Your Business 

After setting your marketing strategy into motion you need to see if it’s working and that means setting up your analytics. 

There’s a long list of analytics we could talk about but I want to emphasize the 5 most important analytics that you need to understand in detail if you’re serious about growing your business. These metrics are:

1. Website visitors

2. Conversion to leads
3. Conversion to paying customers
4. Customer acquisition cost

5. Customer lifetime value

Funnels

Before we talk about each of them, let’s make sure we understand the sequence of events involved with getting a paying customer. You should create an outline of the sequence of events for each service, target market, and promotional channel. Think of these as individual sales funnels.

For example, if you want to offer services to people in your local area by using Google Ads to bring people to your site (visitors) then ask them to signup to receive a free report (leads) your funnel could be:

Google ads > landing page > email optin > email sequence for 5 weeks > schedule a call > paying customer

If you wanted to offer services by using Search Engine Optimization your funnel could be:

SEO > landing page > email optin > email sequence for 5 weeks > schedule a call > paying customer

Visitors, Leads, Paying Customers

In this case, you want to know:

How many people visited the landing page?

  • How many signed up for a free report, newsletter, special offer, etc?
  • How many scheduled a call?
  • How many became paying customers?
  • A typical result would be 100 visitors, 10 signups, 3 scheduled calls, 1 paying customer.


Customer Acquisition Cost (CAC)

Now that you have this information you can calculate your average Customer Acquisition Cost (CAC). In this example, if the 100 visitors were from Google Ads and you paid $5 per click then you spent $500 to get one customer. Your CAC is $500.

Customer Lifetime Value (CLV) 

Now, you need to decide whether spending $500 per paying customer is an acceptable number. The first thing you need to do to answer this question is to calculate the Customer Lifetime Value (CLV). 

For example, if the average amount you charge for your services for these customers is $2,000 then you know that: $2,000 (initial revenue) – $500 (CAC) = $1,500 profit.

Now you just need to deduct any costs incurred when delivering the service. For example, if you have employees or you outsourced some or all of the work to a freelancer then you need to deduct those costs.

In the meantime, if you do a good job for the client and have an ongoing marketing strategy that targets your existing clients then you can expect to generate more revenue from this client over time.

That’s why we look at CLV and not just the initial revenue from the first sale. For example, if the spent an additional $3,000 on additional services before ceasing to be a customer then the CLV would be $2,000 (initial revenue) + $3,000 (additional revenue) = $5,500. Again, you will need to deduct any expenses incurred in delivering the additional services in order to calculate an accurate profit number.
 

Conclusion

In some cases, you will be profitable after selling the initial service. In other cases, you will only be profitable after providing additional services. The critical conclusions are:

  • Comparing your Customer Acquisition Cost with your Customer Lifetime Value allows you to understand how profitable your marketing activity is over the short, medium, and long term.
  • You can use this information to understand whether to scale up, adjust, or terminate a marketing strategy.
  • You need to be “very proactive” about optimizing each step and ensuring that you are accurately measuring each step. You need to maximize the traffic flowing into the top of the funnel and you need to optimize the conversion rates at each step within the funnel and you need to maximize your ‘backend’ (additional) services. 
If I ask you for each of these five metrics and you cannot tell me the answer (without researching anything) then I will not take you seriously as a business owner. If you take the view that these are numbers that your “marketing person” knows and there is no need for you to know them, then you are wrong and I will not take you seriously as a business owner.
 
As you can see, these 5 simple metrics can tell you almost everything you need to know about how effective your overall marketing strategy really is.

 

The 5 Most Important Metrics For Your Business
The 5 Most Important Metrics For Your Business

Adam Radly

Founder of 'I Imagine'

> $100 Million raised for his businesses

> 1 Million views for his Tedx Talk about passion

Founder of World Reconciliation Day with Nelson Mandela

Learn more about Adam

The 5 Most Important Metrics For Your Business The 5 Most Important Metrics For Your Business The 5 Most Important Metrics For Your Business The 5 Most Important Metrics For Your Business The 5 Most Important Metrics For Your Business

Adam Radly

Adam Radly

Founder of 'I Imagine'

> $100 Million raised for his businesses

> 1 Million views for his Tedx Talk about passion

Founder of World Reconciliation Day with Nelson Mandela

Learn more about Adam

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