Here are some widely used key metrics for entrepreneurs:
Customer Acquisition Cost (CAC) CAC measures the cost of acquiring a new customer. It is calculated by dividing the total marketing and sales expenses by the number of new customers acquired. A lower CAC indicates more efficient customer acquisition strategies.
Lifetime Value (LTV) LTV estimates the total revenue a business can expect from a single customer over their lifetime. It's essential for understanding the long-term value of a customer and ensuring that the CAC is justified.
Monthly Recurring Revenue (MRR) MRR is a crucial metric for subscription-based businesses. It measures the predictable revenue generated each month from active subscriptions, helping in forecasting and financial planning.
Churn Rate Churn rate calculates the percentage of customers who stop using a product or service over a given period. A high churn rate indicates issues with customer satisfaction and retention strategies.
Gross Margin Gross margin measures the difference between revenue and the cost of goods sold (COGS), expressed as a percentage of revenue. It helps in understanding the profitability of the core business operations.