Three Common Pitfalls of Traditional Business Metrics Analysis

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By Claire Beveridge of Control

Congratulations! You’re ready to launch your new business. Your website is firing on all cylinders, Google Analytics is installed to monitor your traffic and conversions, and your social media channels have been set to ignite the world with promoting your products. But have you thought about how you’ll be measuring the success of your business?

Business metrics are the only weapon you need when it comes to analyzing how well your latest venture is doing. Metrics will tell you how many people are leaving your business each month (customer churn), what your monthly recurring revenue (MRR) is — especially important if you’re a Software as a Service (SaaS) business — and allow you to calculate the profitability of each individual customer (customer lifetime value a.k.a. CLV).

Without understanding and measuring these types of metrics, your business will struggle to gain investment and, perhaps more importantly, you’ll be uninformed of how well your business is performing.

What business metrics should I be measuring and why?

There are a substantial amount of business related metrics out there. Depending on the type of business you’re running — either a physical retail space, an e-commerce store, or a SaaS operation — you’ll want to measure the following key business metrics:

  • MRR
  • CLV
  • Customer churn
  • Customer acquisition cost (CAC)
  • Average revenue per user (ARPU)

Measuring these five metrics will allow you as a CEO insight into understanding your customers, knowing your revenue on a monthly basis, analyzing your business’ ability to grow and scale, and keeping track of how much money your business is spending on acquiring a customer. Metrics will enable you to make better business decisions and have greater success as a company.

The three pitfalls of traditional analytics measuring

Understanding which analytics to measure is only the first step in understanding your business’s success. Actually obtaining, tracking, and analyzing is where the hard work begins. Here we guide you through some common pitfalls of traditional analytic measuring techniques to help enable you to make smart decisions when it comes to your business.

1. Using spreadsheets is over

Spreadsheets do have a time and place, but that time and place is not for measuring analytics. It’s a fact that one in five businesses have suffered financial loss by using spreadsheets. This is due to a number of reasons including data entry errors, formula errors, and analysis errors. Using spreadsheets can easily kill your business – don’t fall foul to monitoring your precious data on this unreliable platform.

2. Traditional techniques are time-consuming

Traditional analytics measuring not only means the use of the dreaded spreadsheet, but also a lot of time spent inputting and analyzing data. You’ll be correlating information from your balance sheet, profit and loss accounts, accounting software, notes on your laptop… anywhere. And once you’ve correlated it, guess what? You then have to analyze it. Good luck with that.

3. The cost? Lots.

Let’s say your business has grabbed the attention of an investor. He’s asked to see your customer acquisition cost in comparison to your customer lifetime value. The investor is interested in knowing how much you’re spending on acquiring a customer and whether this balances out over a customer’s lifetime with your business.

Do you have this information to hand? Probably not. Cue emailing your dev team, sales & marketing team, and endless amounts of back and forth to get the figures you need — all at your team’s hourly rate of pay. The cost? Substantial.

Analyzing business metrics might be a walk in the park if you only have a handful of customers. However, the minute you hit the 500+ mark, you’d be a fool if you think this is something you can manage on your own. Collecting, combining and calculating metrics is a spreadsheet nightmare that can leave you sleepless. And even worse, building a monthly report can become a habitual draining of your funds.

 

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