Financial upkeep is the core area of any business venture. For medium to large-scale businesses, separate financial departments are established but for small businesses, financial tracking falls within the ambit of the manager. When the business is in its initial stages, the financial administration requires concrete attention to details for a novice can not bear unnecessary expenses however minute they are. Think of these small non-productive expenses as holes from where your business’s efficiency is leaking. Left untreated for a while, you can say goodbye to your whole business.
So, before initiating a business project, always make sure that you know the basics of the financial metrics we are going to describe below. This will help you keep track of your finances and will enable you to identify and work on possible improvements. Areas, where you are spending less or areas where you are overspending, can be worked on by following your metrics.
Take Care of your Cash Flows and Revenues
We all know what revenues are, the total capital we have earned over a period. This is the most important indicator of how well your business is doing. If you overlook your revenues, chances are you will end up making a hole in your principal amount without having a guess even. You can identify periods where your earnings are most and periods where they take a slump. Moreover, you can also determine the most profit-generating products as well. Without keeping a periodic check on the economic health of your enterprise, you can not progress. Through this, you can make an informed decision that whether you have to expand in any area or pull back.
Customer Acquisition Cost
CAC is a very important financial metric. It is the cost your business takes on while acquiring a single customer. This is its theoretical definition, in practice, it means how effective your marketing is and whether you are spending too much for getting potential customers while shrinking your profits. Though calculating CAC is not rocket science you can still find helpful customer acquisition calculators.
By customer retention, we mean those who stay with you for a long time. Your loyal customers continue using your services and products. This is a measure of so many things like your overall acceptability, your products/service quality et cetera. A successful business retains its old customers and continues acquiring new ones.
Loyal customers are so important for your business since they are a great source of indirect marketing for you. To keep an eye on your customer retention progress, all you need to do is maintain the data of your current customers and you will ultimately know whether they are returning or not. You can also contact them if they are not returning and the potential issue that arises can be adequately tackled. Usually, customers leave because of major issues like a sudden increase in prices and drop in quality or for minor ones like delivery times and discourteous behavior of service staff.