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Top 8 Metrics to Monitor as You Bring Together Your 2023 Plan: Part 1

To finalize your 2023 plan, focus on the facets of your business that are most important: sales and revenue, and getting and keeping valuable customers. Consider, also, efficiency and cash — are you able to get all that revenue from customers and keep some of it as profit or have enough cash to be sustainable?

I’ve put together the top eight metrics you should be continually monitoring, so you’ll have a really good sense of the growth in your revenue and the growth in your business, as well as your ability to survive in the long term. Here are metrics 1–4:

1. Revenue growth

Revenue growth is a very fundamental metric. Your month-on-month revenue growth will show you that your customers are still buying from you, that your marketing is working and that you’re converting leads into sales.

2. Net profit margin

Net profit margin is important for all types of businesses, because it shows how well you are turning your revenue into profit. It also shows if you can survive in the long run. If your net profit margin is low or even negative, it will help you decide what you need to do. It could indicate you need to sell more or, perhaps, restructure how you are producing your product and getting it to the customer. It’s a good barometer of how well you’re cycling through getting revenue and converting it into your bottom-line profit.

3. CLV-to-CAC ratio

Your customer lifetime value (CLV) to customer acquisition cost (CAC) ratio tells you how much the value of your customer exceeds your cost to acquire that customer. It’s a very fundamental economic unit of your business. Take all your customers and determine what the dollar value of an average customer brings during their lifetime. Is that number more or less than the amount you spent to acquire them? If you’re spending more to acquire than the value a customer is bringing to you, then that’s not sustainable. Even if you’re at the very beginning stages of your business, the ratio should be trending up. For a CLV-to-CAC ratio, 3:1 is a good benchmark; the higher the number, the more valuable your business.

4. Monthly recurring revenue

The monthly recurring revenue metric is most relevant for SaaS businesses, because it shows your predictable revenue stream. It’s different from the actual revenue in your P&L, but it shows what you already have under your belt in any given month as revenue that will recur into the future. It’s a measure of the fundamental value of the business. Investors look at this when they are valuing your business.

Stay tuned for metrics 5–8 in my next post. In the meantime, if you’re curious or confused about any or all of these metrics — and how they should fit into your plan for this year — please reach out to me. I’m happy to help.