Running a business can be quite overwhelming, especially in its early stages.
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You probably have to wear all the hats in the
business – Finance, Customer Relations, Marketing, Communications, Technology and probably logistics too.
Depending on the nature of the business, data is necessary to help you make informed decisions. And to do this, you need to effectively track certain numbers in your business to put you on the right track for overall success.
Every good business should have a revenue generation model, that shows how income is generated. Whatever model it might have, as long as the money goes in and out, it is essential that the numbers are effectively tracked to prevent debts in the long run.
Understanding the business cash flow will also help you make decisions on the need funding or not, the type of funding to consider, and where to channel your productivity for increased earnings.
The aim of every business is to maximize profit and this can only happen when you track cash flow in the business.
It is evident that profit is being made when money generated from sales of products or services is more than expenses incurred. It shows that the business is on the path of sustainability to an extent.
If otherwise, then you are most likely running at loss and it is best to re-strategize early enough, to save the business from wreck or bankruptcy.
Most times, the number of customers (paying) you have determine the amount of cash you have in the bank. When tracking the number of your customers, you also need to track that of your active
customers. This will help you know and understand the demography of your customers and also help you create products with them in mind.
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Customer Acquisition Cost
Acquiring a new customer takes time and a few resources. What you spend in acquiring a customer needs to be way less than what the customer is paying in return for your product or service. Customer Acquisition Cost (CAC) is your best bet to getting your figures right. It is the cost a business incurs in acquiring a customer.
Many businesses fail to track this number because they think it is not feasible, meanwhile, it is usually hidden in marketing, Communications, conversion and retention costs.
It sounds simple but it could get tricky. Some may think all they need to do is ask the accountant how much they have left and if they can still pay expenses for the month, but it is beyond that.
It has to do with how long you have left before the business becomes a shadow of itself.
Tracking the runway of the cash left helps you know how long the money in the bank can sustain the business and also helps you salvage the situation before it worsens.
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Track The Lifetime Value Of Your Customers
As much as you want to build loyal customers as a brand, you also need to be aware of your competition, the financial conditions of your customers and also change in taste of your customers.
Things happen along the line, so it is much safer to be prepared for whatever situation that occurs. Tracking the lifetime value of your customers helps you know how long a customer will be around.
Tracking numbers in your business is really essential, that is why most big firms employ experienced finance persons, data analysts and even customer success and growth managers to ensure that they are building a sustainable business.
In a situation where you cannot employ many hands, you can leverage various business software such as Customer Relations Management (CRM) tools to help you get the job done.
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