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If you have been running your business for a couple of years, you would naturally like to know what you have achieved so far. You cannot conclude that your business is growing from cash coming in because that includes your expenses too.
Although you can meet all of your expenses from revenues of a particular year, several other factors count to decide the progress of your business. High net worth is a good sign to indicate the success of a business, but it may be the symbol of short-term success.
You should have benchmarks to measure the growth of your business. The first and foremost thing is you should have specific goals. If the goals you have set are not realistic, measurable and achievable, it is senseless to compare yourself against the benchmarks.
It is paramount to measure the growth of your business from time to time to ensure that you are performing better than your competitors are. Here is how you can identify if your company is growing.
Analyse the conversion rate
The success of a business depends on happy customers. If you are not able to satisfy your customers, you will lose them to your competitors. You do a legwork of generating leads, but this is not the only part of your job. You will have to convert them.
You would be converting some of your leads, but just looking at the size of your revenues is not enough to conclude. You must know the cost of generating leads and compare it against the conversion. It might be hard ore impossible to convert all of your leads to customers, but the higher the conversion, the better.
To calculate the conversion rate, you should divide the conversion amount by the total inquiries place. For instance, if you had 50 conversions from 500 leads, the conversion rate will be 10%. If the rate is very low, you should figure out the cause – if it is your sales team that needs to be given additional training.
Look at your revenues
You cannot ignore this factor to measure the growth of your business. If you are generating a high amount of revenues, your business will be considered healthy. However, it does not just figure that will tell you whether you are growing or not.
Here revenues mean net profit. You likely have a high amount of revenues, but the net profits are nominal because of high operating cost. Do not forget to compare it against the marketing, advertising and another operating cost. Make sure that the product and service you are offering are aimed at the right type of audience. Marketing campaigns derive the desired output; new users are showing interest in your products, and the like.
If your business fails to generate the desired amount of revenues, you can offer discount offers and schemes to push your sales. However, you will have to analyse the real reason for a shortfall in sales. Likely, your customers are not happy with the quality of your product or after-sale customer service, or they find the same quality product from your competitors at lower prices.
Analyse the number of new customers you have acquired
Like revenues, customer acquisition cost is also one of the significant factors considered when it comes to identifying the growth of your business. Even though your business is generating revenues, your overall progress may not be satisfactory.
This is because the cost you have been incurring to obtain new customers is not paying off. You can estimate the acquisition cost by dividing the amount of money you spent by the number of new customers. Sometimes, despite making profits, your overall condition may not be satisfactory.
Try to keep your business expenses as low as possible. Your customer acquisition cost is likely high, and yet you have profits in your account. Find out the reasons for the high acquisition cost. It can be due to poor targeting and too many and a few campaigns. Make sure that you identify the actual cause of this problem and then fix the issue.
Analyse the retention rate
Acquiring new customers is essential, but retaining them is paramount. A high customer retention ratio indicates that your customers are happy. It is crucial to know the attitude of your users toward your business. A slight improvement in customer retention ratio can yield to increase in 20% of profits. You can minimise the acquisition cost by improving the retention rate.
Whether you have a small business or large business, you cannot analyse the progress of your business without these metrics. You should periodically check if you are generating enough revenues. However, do not forget that this is not the sole parameter for measuring your success. You should consider other benchmarks too.
Of course, it is not as easy as it seems. You will need a marketing expert who will outline a complete measurement plan. Make sure that your marketing team is expert enough in doing so. It requires additional funding, but it will pay off. However, you can fund it with bad credit loans instant decision Ireland in case of a shortage of funds.
If you have just opened a start-up, the ideal time for measuring the growth of your business is when you cross the breakeven point. Since it might be hard to fund this expenditure with a business loan, you can take out loans for the unemployed.