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5 Key Metrics That Will Propel Your Business To The Next Level

5 Key Metrics That Will Propel Your Business To The Next Level
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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

It’s simple. To grow your business, you need more sales. For more sales, you must have the answer to the most crucial question: “Why does my customer buy from me?” Every successful company has answered this question. It’s time you found it for your business too.

Customers generally buy for one (or all) of three reasons:

  • The offering addresses their pain point.
  • It makes your customer gain intangible value.
  • It gets things done, thus giving customers a leg up on competition.

When you know ‘why’ your customer buys from you, you can develop a robust offer. But a stand-alone offer doesn’t work. It must be clubbed with five metrics, which increase your sales.

These five keys metrics are:

Urgency

How badly does your customer want it? The urgency of your offering in the customers’ eyes is directly proportional to your sales. The more urgently he wants what you offer, the shorter is your sales cycle. You should do an introspection to find out which aspects of your offering create an urgency in your customers’ minds?

Pricing

What will they pay you for your offering? Along with urgency, price plays an important role in determining your sales. The more a customer pays you, the faster you can achieve your sales targets. This, in turn, means you can scale up faster. For instance, your product might be worth Rs 5 lakh, and you aim for an annual turnover of Rs100 crore. How many units must you sell? 200. But if your product costs Rs 5,000, you’ve got to sell 20,000 units to achieve the same turnover. Does your offering convince your customers to pay you more than they currently are?

Cost Of Acquisition (CAC)

What do you spend to get a customer? The cost of acquiring customers (CAC) is a key metric to determine your pricing. Every action your organization takes to get a sale has an associated cost. Every investment you make to acquire customers contributes to your CAC. Even activities like networking, guest speaking, seminars and other events are incurred costs. These costs must be taken into account while calculating the cost of acquiring your customer. The lower your CAC, the higher your profitability. Hence, it’s important for you to implement a system, which makes your sales process efficient. The system should also enable your company to lower your CAC in each quarter. What can you do today to lower your CAC?

Cost Of Value Delivered (CVD)

How much do you spend in keeping your promise? The Cost of Value Delivered (CVD) is what you spend to give your customer what he paid for. Delivering your offering to the customer and services rendered after sales are part of CVD. For instance, you manufacture and sell your private label of garments in retail stores. How much does manufacturing the garments cost you? Account for material costs, worker wages, overheads and everything else. Also, how much does the retailer charge you? This generally is a fixed cost since the retailer worries about his overheads. When you add these two costs (manufacturing costs and retailer fees), you come upon your Cost of Value Delivered (CVD). Like CAC, CVD is a significant metric to determine your business’ profitability. Here, your garments’ maximum retail price minus your CVD is your profit. You must deploy a system to bring down cost each quarter without compromising on value.Can you keep your promises to customers for a lesser cost?

Market Size

What's the size of your market? The last and most important metric to affect sales is market size. Ideally, the market should be of two types —a mature market ready to purchase what you offer and a niche market with a low and an unfulfilled pain, gain or yearning for an edge. The former will get you sales on the basis of volumes while the latter will ensure you more profit per sale. If your systems can tap into organizational efficiency to bring CAC and CLD down then, other factors staying constant, you can grab market share quickly. How much of your market can you capture? (100 per cent is not a realistic answer.)

Grow Your Business The Right Way

Sales and profitability play important roles in scaling a business. Without these you will have little control over your business and expansion plans will not take off under such circumstances.  But you can, with little help, achieve your business dreams of scaling. You can take your company to levels higher than you have imagined. All you have to answer is one question: Why does my customer buy from me? Once you’ve got the answer and placed effective systems to replicate your best sales, growth and stability will just be a matter of time.

 
Edition: April 2017

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