Business Metrics-The Panagora Blog

Business Metrics-The Panagora Blog

 As entrepreneurs, we’re always looking to do at least one of two things at any given time:
 1.      Grow our revenue
 2.      Raise funds for our business. But do you know there are some magic metrics that can help you achieve both goals in one fair swoop like a double-edged sword? When you’ve raised funding from your family, friends, and fools (yeah, that’s a thing) and you begin to approach serious investors for the funds to grow your business, they’ll require you produce the following metrics: 

Cost per acquisition: How much it costs for your business to acquire a new customer. Your cost per acquisition or CPA helps determine how much traction your business will get from each lump sum of investment and what the prospects of market domination are for your business given time and money. 

Return on ad spend: How much you need to invest in advertising per time to get a given result. Peter Drucker, who is called the father of business consulting wrote “There are only two things in a business that make money – innovation and marketing, everything else is cost”. An investor uses this metric to determine how well your marketing works. Your ROAS helps you calculate how much each dollar spent on advertising returns to your business in gross profit. 

Retention rate: Sometimes, this is also called Churn rate. With this metric, you can determine how many of those one-time customers make a repeat purchase and stick around for the long term. If your acquisition is massively successful but your churn rate is also high, you can examine your product or offering to determine why so many people are not making repeat purchase.Knowing and optimizing these metrics is what separates the high-growth startup from the everyday small business. When you know your metrics, three things happen 1.      You know exactly where to put your money and how much to put in every single time,
 2.      Your business becomes very investable and attractive to investors
 3.       You take away the guesswork from your marketing and you are able to grow your revenue seamlessly. But the problem is, most business owners don’t understand that these could be the difference between becoming successful and struggling.To measure your metrics, you have to build a system that does just that into your business.
 Measuring magic metrics is very important in business.

 

The basics and difference between a high-growth Startup and a regular SME :

In 2012, Instagram was being managed by only 13 employees, but it had over 30 million users.
If you calculate that, that is more than 2,300,000 users for each employee.The same year, the company was valued at $1 billion by Facebook, the authority in all things social media at the time.
But at the back-end, The Instagram app was always crashing.Why?They didn’t have enough servers to house the content their users were generating on a minute by minute basis.Think about it. A company that cannot even afford to pay for servers. They did not have any major real estate. No charter that gives them the rights to all the diamonds below the Pacific, but still, they were valued at $1,000,000,000.That’s quite a lot.It then calls for a perennial question that entrepreneurs, business owners, and investors alike have always asked themselves.

What is the Difference between a high-growth Startup and a regular SME?Over the years, there have been a collection of answers to this question that have emerged from empirical research and these are some of the factors that differentiate the regular SME from the high-growth startup:

 Difference Between a High-Growth Startup and a small business

1. The market size
Bob Iger the former CEO of Disney in his 2019 book ‘the Ride of a lifetime’ penned a nugget he gleaned from his own mentor Dan, it reads

“Avoid getting into the business of manufacturing trombone oil. You may become the greatest trombone-oil manufacturer in the world, but in the end, the world consumes a few quarts of trombone oil a year!”
– Dan Burke

If the market for your product or service is not large enough, then chances are that, you may end up with a 100% share of a minute industry that won’t pay the bills.

2. Whether or not the market is growing
The postal service market as far as Nigeria is concerned was disrupted at the advent of telecommunication. But looking at the size of Nigeria at the time, you may think “Wow, this is a large market, I may be able to do a thing or two here”.
Truth is, you won’t. That market was going away.
Today, we have derelict offices of NIPOST all around Nigeria to show us the importance of leaving a shrinking market on time.

3. The rate of growth of the company in question
To know a company that will turn out to become a unicorn, investors look at its seeds. How fast is it growing? How well is it doing? And a couple of other questions. It is not enough to find yourself in a large, growing market, the question is can you grow big enough, fast enough to claim a reasonable market share and capitalize on the opportunities that market offers?
These questions are answered by the company’s metrics which is next on the list.

4. The company’s key metrics
There are many things that can be measured in a business, but most of them turn out to be what we call ‘vanity metrics’ on the other hand, there are Magic metrics which I’ve written extensively about that indicates a company’s ability to reach it’s potential and grow large enough to be valued as a Unicorn.Peter Drucker is credited with saying “what gets measured, gets managed”.It is only when you can measure the Magic metrics of your business that you can manage the core of your growth and scale seamlessly, and this is a critical characteristic that is used to differentiate a high-growth startup from a regular SME

5. Virality loop and NPS
If you’ve got number 1 above right, and you are sure about number 2, then by all means, you need this one in your business. This is what truly transforms you into a rising unicorn.

A virality loop and a high NPS score.

As usual always remember:

The key to success is seeing possibilities where others see only impossibilities.

👆

Everyone can be a hustler but it takes an extraordinary human being to be an entrepreneur...Be proud of you!   ✌