7 Financial Metrics You Need to Know for Long-Term Success

Introduction 

Its relevance in tracking business growth over time by measuring the financial ratios and identifying the state of a business. A brief description of the 7 metrics that are to be discussed in the following sections.

1. Revenue Growth 

- Definition: The rate of change in total volume of sales/revenue achieved in a particular period compared to a previous one

- Why it matters: Indicates whether you are expanding your business and the amount of revenue you are earning more so in the future. 

- What to aim for: reaching year over year revenue increases of 10-20%+ 

2. Gross Margin 

- Definition: Total sales revenues reduced the cost of producing and delivering your offerings

- Why it matters: Shows how much of your actual product and service offerings are actually profitable

- What to aim for: Minimum of 40-60%+ gross margin depending on the type of business.

3. Customer Acquisition Cost 

- Definition: The cost to acquire a new customer average

- Why it matters: Enables you to measure the marketing investment Return on Investment and marketing efficiency 

- What to aim for: Huge and highly depends on many factors but < total customer value throughout the lifetime.

4. Customer Retention Rate

- Definition: Customer churn rate period over period 

- Why it matters: Demonstrates commitment from the customers/ satisfaction; cost less when used to retain rather than acquire new ones.

- What to aim for: Keeping an employee retention rate of 60-80%+ is good.

5. Cash Runway 

- Definition: The number of operating months of the company depending on the amount of cash and cash equivalents currently on hand    

- Why it matters: Offers understanding of the company’s economical standing and capacity to operate during a crisis.

- What to aim for: 6-12+ months of cash on hand 

6. Burn Rate

- Definition: A measure of the amount of cash or equivalents that is being lost by each company for each period 

- Why it matters: Reminds not to lose sight of cash runway measures – don’t want to bleed too severely

- What to aim for: Variable but a slower burn rate gives more time. 

7. Profit Margin

- Definition: Expenses/Taxes & the percentage of net profit

- Why it matters: Lasting the ability to turn profitable or earn consistent earnings and losses as a business achievement  

- What to aim for: It very much depends on the industry – can start negative, but 10%+ is positive.

Key Takeaways

Such information include; The 7 metrics discussed above and why such attentions should be paid.

- how frequent analysis of these key performance indicators plays a role in decision making 

Paying attention to these measures helps to make the necessary corrections in order to achieve lasting commercial objectives

If there are changes you think should be implemented or other details that need elaboration let me know. This is something I can develop into the full first draft once the direction is taken.