We must be aware of the company’s key performance indicators. Focusing on KPIs is rather crucial to growing our company in a valuable manner. If constructed correctly, it can give management and potential investors a look into the company’s state. The KPIs we focus on are:
1. Customer acquisition cost (CAC): CAC is the amount invested in marketing, sales, and related expenses, i.e., the money required acquiring a new customer. This helps understand how efficiently our marketing strategy is working as compared to other competitors.
2. Retaining customers after acquiring them is crucial. It indicates the amount of paying customers who keep purchasing products for a given period. When the retention rate is high, we know the company has a quality product bringing back potential customers.
3. Lifetime value (LTV) tells the net value to our business over an estimated time. Understanding LTV and its relation to CAC is important to build a sustainable company.
4. The ratio of CAC to LTV is very important. This indicates the sustainability of our company.
5. CAC recovery time (or months to recover CAC): It helps to measure the amount of time taken by a customer to produce enough net revenue in order to cover the CAC. CAC recovery time impacts cash flow directly and the runway (The runway measures the amount of time until the company runs out of cash, expressed in months).
6. Understanding revenue and monthly expenses allow us to calculate our company’s burn on a monthly basis.
7. Conversion rate reveals the company’s ability to sell its products to its customers and customers’ desire to buy the product. We try to review it or track it over time for improvising.
8. Gross merchandise volume (GMV) is a very helpful KPI. GMV allows us to know the overall dollar value of sales or services.
9. Monthly active users (MAU) are used by companies with a social presence. It shows the amount of unique users who visit our site or app in 30 days.