Some financial and operating metrics every owner should know:
🤝🏿Customer Cost to acquire = money spent on marketing and advertising (including salaries) / customers who bought something
This tells you how efficient your marketing and advertising is.
👯🏿♀️Repeat Customer ratio= Repeat Customer Transactions / All Sales Transactions
This tells you how “sticky” your product is. Repeat customers are cheaper than new customers so you want this to be high.
📈Gross Margin = Sales – Cost of (Goods/Services) Sold
This tells you how profitable your product is. You should know this for every service or product you sell. Generally, higher is better, especially when your operating costs (advertising, salaries, web hosting, taxes) are low.
📈Net margin = profit / sales
This tells you how profitable your business is. Compare to other businesses in your industry to see where your business stands.
📅Days in inventory = (Average inventory * 365 days) / cost of goods sold
This tells you how long it takes you to sell your products. The lower the better!
💵Quick Ratio = (Cash + Bank Accounts)÷(money owed to vendors + all bills due in 30 days)
This tells you how well you’re managing the cash you need to stay in operation without needing a loan or using credit. You want this to be >1.
💰Cash on Cash return = net income after tax OR cash from operation / cash invested
This tells you how well your business generates cash flow, how well you manage taxes, and how much every dollar invested performs.
📊Return on Assets = Net Profit after tax/ Investment
Similar to cash on cash except this metric is used to show the true return your business generates from all assets used in the business. Return on equity is similar and tell you how well all Investment in the business performs.
If you need help calculating or understanding contact us facebook.com/gsdfinancially