Quantifying your success is a great way to see how your small business is doing in an objective fashion. Two metrics in particular are significant in determining if your company is operating efficiently enough to continue to grow and prosper.
Customer Retention Rate
The first is the customer retention rate, which refers to the number of repeat customers of the company as opposed to one time customers. One way to calculate this is using the following formula:
(Number of total customers – number of new customers)/(original number of customers)
The goal is to keep the retention rate as high as possible, which implies that your business is satisfactory and significant to your customers.
Customer Acquisition Rate
The next metric is the customer acquisition rate, which is how much money a business is spending to acquire new customers. To calculate this, you simply add up marketing and sales costs and divide this by the number of new customers.
It is important to keep your customer acquisition rate as low as possible in order to ensure that you are not losing too much money in order to gain a small number of customers.
Both the customer retention rate and the customer acquisition rate should be used as general benchmarks for your company to measure its efficiency. Different industries have different standards, and so it is important to research the values for typical firm in your industry. These metrics can be used to potentially apply for bank loans or can be shown to investors to advertise the success of your business.