Key KPIS to run a successful business

If your asking "what is a kpi?" First it at all, you have understand that when it comes to marketing, most people are lazy to analyze metrics. However, the truly successful businesses are those that care enough to understand what their key KPIs are and take action to continually improve these indicators. 

We know it's not always easy to read and understand business growth indicators, but if you're here it's probably because you're interested in learning which are the key metrics you need to take into account to improve your business growth strategies.

Welcome! In this article we are going to tell you why KPIs are so important and what are those key metrics you should not fail to take into account when thinking about new strategies in your business. 

Let's get started!

What are KPIs and why are they important?

KPIs are those growth indicators that allow us to monitor how the marketing strategies we are implementing in our business are going. 

They are essential to ensure compliance with our marketing plan and to measure the results that will help us make better decisions in the future. 

At the same time, being clear about which KPIs we should pay attention to according to our business model will allow us to take "emergency" measures in case things don't go as planned. 

For all these reasons, it is essential to befriend them. You'll see that soon after you start using them and becoming familiar with them, it won't be so difficult to understand them. 

Let's see what KPIs are the most important in a business.

4 key KPIs for a successful business

It's worth clarifying that there are thousands of KPIs and they vary depending on the approach. We're going to share with you some of the ones that, according to our judgment, you should always have on hand. However, beyond the KPIs themselves, the important thing is that when you sit down to analyze your business you can understand what you are measuring, why you are doing it, how you are going to do it and how understanding those numbers will help you make decisions that will impact your business. 

Because there's no point in learning how to read the KPIs and knowing what each one of them is about if we don't know what to do with those numbers later in practice, right? 

Without further ado, here we go: 

1. CAC 

This metric tells us how much money it costs us to acquire a customer. And it is one of the key indicators when it comes to understanding whether a business is profitable or not. It is calculated by dividing the amount of money spent on acquisition marketing (ads, marketing team salaries, digital tools, etc). If you are interested in learning more about this metric and how it affects your business we invite you to click on this link. 

2. CLTV 

This is an essential growth indicator. It tells us how much money each customer spends during the time he/she buys from us. That is, how much money they spend in our business throughout their life in exchange for our products or services.  Together with the CAC it gives us a lot of information about the financial health of our business. Many businesses make the mistake of not analyzing these metrics and spend years investing without knowing if their business is profitable or not. When we compare these metrics we can easily see if our customers over their lifetime as customers leave us more money than we invested in acquiring them or not. If the CAC is higher than the CLTV we are in trouble and we must take action. Here is the importance of always keeping in mind these two KPIs. 

3. ARPU

This acronym stands for Average Revenue per user, that is, to simplify, how much money a customer generates in a given period of time. Here, it's worth making a caveat: ARPU is not the same in a product sales business such as an E-commerce as it is in a subscription business model. When we talk about E-commerce, ARPU is equal to an average sales ticket per period. In contrast, in a subscription business model the ARPU is equal to the fee paid by our customer every month. 

4. Churn Rate

This is a very important growth indicator for subscription business models. It indicates what % of customers we lose (over a period of time) and is calculated by dividing the customers lost over a period of time by the total number of customers. For a subscription business to be profitable, it's always necessary that month after month we add at least the same amount of customers that are leaving or more. To always watch this indicator is key to realize if we are losing more customers than we are capturing. Click on this link to learn more about this topic. 

Does it sound like a lot to you? Well, let me tell you that there are many more metrics, but it's important to go step by step to understand which KPIs you should analyze in your specific case, depending on your business model. 

There's a common mistake in confusing marketing with advertising as if they were synonyms. The reality is that advertising and communication are only one part of marketing. Marketing strategies in a company are much more complex and, as you will see, require a lot of knowledge. Don't be discouraged! If you are here it's probably because you want to keep on learning. 

We invite you to continue browsing our blog where you will find a lot of information to keep on learning about business growth strategies to get your business off the ground. 

What other KPIs do you think we should add to our list?