The financials, the metrics and the data in your business speak a story and tracking your numbers means you are informed and stay on track, or get back on track, quickly.
Have you ever looked at your bank statements and wondered where all the money is going and how effective the spending is?
If it’s a yes, you aren’t alone.
While there are a breadth of data and metrics you can track to make significant improvements in strategy and activity across the board, there are some top metrics to look for to see where your cash position and projected position – which is essential for effective decision making.
The 9 Money Metrics To Measure For A Scaling Business
Here are 9 money metrics to track across your business to make sure you’re making the most out of your cash flow and your revenue.
HQ Metrics For Cash Flow
1. Tech Stack Monthly Costs
How much are you spending each month on software & tech? It’s very common for busy businesses to be paying for tech that they no longer use.
What to Track
Review monthly what you’re spending (and make sure you’re not getting caught out paying for old users or those monthly memberships or subscriptions, too!).
2. Cash Burn Rate
How much cash are you going through each month? When you build up cash, it helps with things like credit rating, lifetime runway (how long you have at £0 sales and monthly expenses) and investment for growth opportunities.
Measurement of the burn rate and calculating the runway is essential to understand when to start seeking fresh capital, which can have a significant lead time.
What to Track
Know your runway time period and review where your cash is being spent each month, so you’re never spending for something you don’t need.
3. Borrowing Costs
How much debt is the company using? Borrowing costs mount up considerably over time, so it’s always worth looking at alternative solutions regularly, we recommend every 3-6 months on average or when there are changes such as the Bank of England interest base rate increasing, like it has done recently.
Also keep in mind that credit borrowing costs covers all credit agreements you have, from mobile phone contracts to business loans.
What to Track
All of your credit-debt spending in one place and the additional interest payable. This will help you evaluate if paying in full, refinancing or continuing is most beneficial to your situation and your longer term plan.
Sales Metrics For Cash Flow
4. Agreed To Invoice Paid Rate
How much time is being spent on closing those leads? If you’re running a professional services business, this is critical for optimising your profit.
In amongst the usual tracking of MQL to SQL and SQL to close for a sales team, it’s often the case that the close rate – ‘sale agreed’ – doesn’t take into account the period between sale agreed and invoice paid. And this directly impacts your costs.
Does it take someone in the team 2 hours to chase this? What’s their hourly rate? This cost cuts directly off from your profit bottom line.
What to Track
Track the time it takes for a sale agreed to turn into a paid invoice. Look into ways that can shorten this part of the cycle so your pipeline process and ops are optimised, keeping the revenue in the profit.
5. Margin Per Item
How much profit is made per sale and what are the parameters to meet this number?
This margin alters with the likes of new or additional tech, changes in staff and/or salary compensation and changes in operational processes – so it needs checking regularly.
What to Track
Track the cost of the entire end-to-end process and resources and have clear parameters on what the costs of the sale are in real-time – software and any other additions the sale process includes. Review these monthly in line with your cash flow management to make sure everything always stays up to date.
Marketing Metrics For Cash Flow
6. Customer Acquisition Cost (CAC) – Per Channel
How much money is being spent to take a prospect from lead to sale? And from that, which are the channels that are providing the most quality?
Whilst a lot of marketing results can be challenging (and sometimes impossible) to track, there are certainly trends and benchmarks to help you know where you’re spending your money most effectively.
What to Track
The cost of acquiring a customer per channel. In some cases, this cost is tracked through time spend (staff/overhead cost), and in other cases it’s by direct advertising cost. However you acquire new leads, track the back to the bottom line cost of acquiring that lead, per channel. For channels that don’t provide any leads, this exercise highlights that, too!
7. Customer Lifetime Value (CLV) – Per Channel
Important for all businesses from professional services to e-comms, the lifetime customer value per channel helps you know what to spend – or not to – on your marketing.
This means you could find out behaviour like if a lead is acquired at a higher cost on a specific channel, they are more likely to spend at ‘x’% more than other channels overall, so you know what your costs are upfront and the likelihood of reoccurring revenue and/or upsell, meaning your mid-longterm cash flow increases with higher upfront spend. Without this data, you could be spending for no results.
Supporting metrics like churn rate (essential for memberships, subscriptions and some e-comms business models), this data can help to work towards a longer lifetime value and building these insights into your marketing strategy.
What to Track
Record and track the average amount of revenue across the entire period you are engaged with a customer. Do this per channel you get leads from – not just the channels you spend time and money on currently.
When you combine the data from the CAC and the CLV, you can see what portion of your revenue on average you want to put into your marketing budget. Often these figures aren’t reverse-engineered back into marketing strategy, so the top of the funnel cost is higher than it needs to be to grow the business and revenue consistently.
HR Metrics For Cash Flow
8. Revenue Per Employee
Whist not everyone is a direct fee earner, the activity of all staff contributes to business success and revenue generated.
Knowing the revenue average per employee enables you to see where the balance is between money coming in and number of staff. This can also help track effectiveness of projects and productivity overall, too.
What to Track
Divide your gross revenue by the number of staff and track this every month. When you’re in growth or scale stage, this number may drop but should rise again quickly to show your team growth plan is working to achieve your revenue goals.
9. Average Cost Per Employee
Knowing what the average costs are per employee helps you with things like setting financial goals, formulating projections accurately and building the right margins into your products or services pricing models.
In addition, this also reflects a better indication of hidden costs on things like staff turnover and marketing spend.
What to Track
Calculate the business costs for all spend and divide that by the number of staff. Track this figure on a monthly basis and if the average cost goes up, it’s a flag to take a look and see what’s going on.
The relationship between the revenue per employee and the cost per employee is that the margins between should grow wider on average which is a key indicator of effectual business growth. In addition to the business overall, these two can be also be useful when tracked by department.
Where is your next saving coming from?
An adjustment in your marketing spend?
Cancelling those subscriptions you don’t use?
Re-financing that loan?
Start tracking your numbers today so you can scale effectively and quickly, optimising your cashflow and your business activity.
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Do you need expert advice?
We can say that investment in a startup is vital for its continued sustenance, growth, and expansion. However, the path to attract this investment is not that straightforward, there are many nuances in the process. Taking the help of an established expert in the domain not only assures that you’re on the right path but makes the process seamless and effective for you.
Nuvem9 has years of rich experience in assisting businesses to get equity investments. Nuvem9 will provide you with a Startup Funding Consultant focused on understanding your startup’s requirements and charting your funding journey. Get in touch for a free consultation session and discuss your company’s specific needs. Nuvem9 has raised well in excess of £10m in loans for its portfolio and would welcome a no obligation call with you to discuss your needs and possible solutions we could help you secure. Here’s where you can book an appointment to speak to us.
Main Image Credit: Austin Distel
