Financial Metrics for the Profit Phase
1. Retention rate and churn – Retention rate - customers that keep using your product or service over an extended period of time and make repeat purchases. Net negative churn - the revenue gained is higher than the revenue lost from churn. A business that can’t replace customers or revenue faster than it loses customers or revenue will eventually become unprofitable
2. Gross profit percentage – the revenues need to be growing at a higher percentage than the cost of producing the product or service
3. Operating profit percentage – Gross profit less operating expenses – if increasing, profit is increasing
4. Owners pay at a reasonable level that supports lifestyle and tax exposure
5. Tax exposure - tax exposure and strategies analyzed quarterly
6. Financing costs – impact of interest and collection costs monitored monthly and reviewed quarterly or annually depending on the type of business
7. Average revenue and profit per customer– know what type of customer provides the most profit so you can focus more of your marketing to reach that customer and focus development
8. Average revenue and profit per product/service offering – focus development in these areas. Evaluate complementary products and services. Subscribe on these platforms:
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