Tracking key business metrics is vital for the health and success of any organization, helping achieve strategic goals while informing operational plans.
Companies must closely track these key financial metrics in order to avoid unnecessary expenditures such as overpaying taxes, mismanaging debt, or missing sales opportunities. Financial dashboard reporting provides the most efficient method for this monitoring and reporting.
After reading today’s blog post, you can click the following link to learn how using a financial platform can help you enhance your produce business’ potential.
#1 — Cost of Goods Sold (COGS)
COGS (cost of goods sold) is an essential metric to keep tabs on, as it helps you pinpoint potential savings opportunities. You can calculate COGS by either using the first in, first out (FIFO) inventory assessment method or the weighted average cost method.
COGS accounts for all direct costs related to producing your products, such as labor and materials costs; it does not take into account indirect expenses such as distribution or sales force expenses.
#2 — Inventory Turnover Rate (ITR)
The inventory turnover rate measures how often a company sells and replaces its inventory over a given timeframe, providing valuable insight for making decisions regarding pricing, manufacturing, marketing, purchasing, and production.
Calculating an inventory turnover ratio involves dividing the total average inventory by the cost of goods sold and considering both initial and ending inventory levels, which may differ.
#3 — Gross Profit Margin (GPM)
Gross profit margin (GPM) refers to the total profit gained by subtracting your cost of goods sold from sales revenue, leaving out any fixed costs such as rent or salaries that appear later on your income statement and marketing expenses that appear further down in its contents.
GPM is an invaluable metric, offering insight into your product’s profitability while helping evaluate production efficiency against rival products.
#4 — Gross Revenue Retention Rate (GRR)
Gross revenue retention is an integral component of subscription-based businesses such as SaaS companies. This metric tracks revenue generated from existing customer bases as opposed to expansion revenue gained via upsells and cross-sells.
A straightforward way to improve GRR is to lower customer churn and downgrades by providing better customer success – this can be accomplished using integrations, features, and upgrades as part of customer success programs.
#5 — Customer Lifetime Value (CLV)
CLV (Customer Lifetime Value) measures how much profit a company expects to reap from a customer over their relationship, including both the direct revenue and indirect contributions like referrals.
CLV can be calculated through predictive and historical models, each providing insight into current customer value but differing in their ability to predict future behavior.
#6 — Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) measures how much it costs to gain new customers, including marketing expenses and sales salaries.
To calculate CAC, add up all sales and marketing costs over an appropriate period and divide that by the number of new customers acquired during that time frame.
#7 — Customer Lifetime Value Percentage (CLTV)
Raising customer lifetime value (CLTV) is a critical business strategy. Doing so can help increase customer retention and generate more profit.
There are various approaches to measuring customer lifetime value (CLV). One straightforward method is the historical approach, which measures gross profit from purchases made by customers in the past.
Predictive Customer Lifetime Value is another method, taking into account customer segments and behavioral indicators in order to predict a customer’s purchase behavior in the future.
#8 — Customer Growth Percentage (CGP)
Measuring the rate at which your business acquires new customers is critical to understanding overall company growth. Comparing this metric with revenue growth can reveal patterns or areas for potential opportunity.
Care should be taken when calculating customer growth percentage, as long periods may obscure exciting details. A monthly average accurately gauges your company’s performance; an inadequate CGP might signal market share loss.
#9 — Customer Loyalty Rate (CLR)
Customer retention is a critical business metric, as loyal customers can often prove more valuable than newcomers. An impressive customer loyalty rate indicates that you’re effectively satisfying existing customers who will continue referring newcomers into your fold.
To determine CLR, take the initial number of customers at the start of an accounting period (S), subtract the new customers added during that time (N), and divide by S.
#10 — Customer Churn Rate (CCR)
Customer churn rate measures the percentage of customers that stop purchasing from your business over a specified timeframe and provides an effective gauge for future growth prospects, or lack thereof.
Calculating customer churn is straightforward: subtract your monthly recurring revenue at the beginning from your MRR at the end. Be mindful not to include upgrades or new sales as this calculation takes place.
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