With so many businesses popping out every day, it can get extremely hard to enter the market and flourish in it. Fortunately, most startups last only a year or so because of mismanagement and unreliability of their processes. Their reluctance to use sales automation and overconfidence in their manual data tracking and whatnot would usually result in a failed business.
Those who grow, however, take advantage of everything they deem to be important to them.
Some of these things are the many metrics that they use to track their growth in the long run. One particular metric: revenue growth outlines how much a business has grown within a period of time. Having insights on this will help them push for more goals, while also filling up loose ends.
Set yourself up to be a successful startup business by utilizing these ways on how you should track your revenue growth!
Computing for Revenue Growth
The first step in tracking revenue growth is to have the means to compute for it. Now if you don’t have a sales automation that does this automatically for you, here’s a computation we took from geckoboard.com.
([Revenue during Month B – Revenue during Month A] / Revenue During Month) x 100 = % Revenue Growth Rate
You may replace Revenue during Month A/B with Revenue during Week A/B for startups as this will usually be a better metric to use. Startups don’t usually have a set revenue growth rate, so relying on monthly data might become too inaccurate. Weekly revenue growth rates provide you with more workable data over a short span of time, meaning you can easily identify problems and achievements with them.
Bear in mind that every CEO or business owner should know their own Revenue growth rate. It’s the sole metric that tells whether the business is doing well or not.
Another useful metric to track your growth rate would be the number of Active Users/Visitors that you have on your website for a period of time. Most of the time, your revenue will be at a constant multiple of your website visitors—especially if you’re a predominantly online business.
Active users and return users are two very important metrics for the simple reasoning of having more of them mean your business reaches more people, and thus more people get access to your services.
Although not as reliable as the actual computation for revenue growth, these can still be significant data when talking about analyzing marketing strategies and the like.
CAC and CLV
Cost of Customer Acquisition and Customer Lifetime Value go side-by-side.
For long-standing businesses who put in money to try and attract new customers, this is an important metric. It justifies whether or not your marketing efforts are worth your spend.
Take a look at the amount that you spend on marketing efforts. Total everything from the actual marketing efforts, to the salaries of the staff and the cost of pay-per-click advertising. Divide the total number to the number of customers that your marketing efforts bring in during the same time period.
This will provide you with the average amount you spend to bring in each client a.k.a. the CAC.
CLV, on the other hand, is the value that a customer or a client will contribute to your business throughout the entire span of their time working with you.
You can compute this by simply multiplying your quotation or negotiated price range to the time that is stated on your contract. For example, a 6-month contract at PHP10,000 per month will net you with PHP60,000.
CAC and CLV coincide because they cancel each other out. The gap between the CAC and CLV should be large, favoring CLV. If this happens, that means you’re earning more than you’re spending, thus adding to your revenue growth.
Having these two be equal or worse, CAC is higher, means that there’s something wrong with your marketing efforts—and that it might be better to rethink your marketing strategy or shut it down entirely.
This should be a no-brainer. The better your conversion rate, the better your revenue stream. This would include website visitors that turn into leads and leads that turn into actual conversions.
More people converted into customers or clients will lead to more revenue entering the business— leading to an overall growth to the revenue of the company!
There are many ways to track your revenue growth. There’s already a computation provide that is widely used across the internet. That being said, that is not the only metric that most people consider when it comes to revenue growth. You might as well want to look at the growth in your active users, the gap between CAC and CLV, and the percentages of your conversion rates. This will help greatly in identifying whether or not your business is truly growing.