We know that understanding the data is so incredibly important when building and running a robust business so I wanted to share with you today some really key numbers to track and understand when you are running an online service based business.
Firstly of course, overall business profit is an essential number to know…but we should break it down further than that - because if you are running multiple programs or service offerings you’ll need to know the profit for each of those programs or services to ensure that each on their own is profitable.
Now there may be odd occasions where you are running program that is not profitable but you are using that as a loss leader into other services you offer - if that is the case, that is ok, as long as their is a fully worked strategy behind that - but you should in that case, still be aware of the profit, or rather, in that case, loss that it generates for you.
Next we want to make sure we are taking the average lifetime value of our clients - of course you’ll have some that come into your lower priced offerings and stay there forever, you’ll have some that come in and leave shortly after, and you’ll have some that come in and ascend through your services or programs.
This is why we need to look at the average. Because everyone is different and everyones journey with our business is different - but we need to be clear on the average so we are clear that if we bring in X number of people into our business each month or each launch, we can predict the future from that.And following on from this, and perhaps stating the obvious, but we do need to make sure we are tracking the number of new clients and sales we are making each and every week in our business.
Not only do we need to track that to make sure the business overall is on track to hit its objectives, but we also need to know in order to make sure our team are hitting their metrics too, since every member of your team should be revenue and profit positive. And very much linked to the number of sales are both the number of sales calls made if that is the way you sell in your business, and the conversion rate.
The conversion rate is a percentage and is the number of sales calls made against the number of sales that close. You should see that over time your conversion rate is constant unless you are making a focused effort on increasing the rate - and that is something that, if you have a low conversion rate you can then course correct on when you know the number and are tracking the data.And linked to the number of sales calls and conversion rate is the cost of client acquisition.
How much does it cost you in your business to acquire a new client. For this you’ll need to look at your ad spend and then the number that become leads, and the number of those leads that become clients to calculate the cost to acquire each client on average.
You should be comparing the number then to the average lifetime value of a client that I covered earlier…and you want to keep in mind too, at the stage, what is the average profit per client as well - is your cost of acquisition too high, too low of just right with all these parts considered?
If you are running a membership site or monthly program model then knowing and understanding your churn rate is going to be incredibly important to understand if things are going wrong with those programs. Churn is the annual percentage rate at which clients stop subscribing or stop being part of your membership. Churn is important because it directly affects your service’s profitability.
Retaining existing customers is more profitable than acquiring new ones. Not to mention the reputation issues if you are not providing the service that people through they signed up for and so they are then leaving.
The final key number that I want to cover today is the revenue per full time equivalent or FTE.
What I mean by full time equivalent is the number of hours someone in your team works - so someone that is full time would be 1 full time equivalent and someone that works part time would be 0.5 full time equivalent.
We really want to be aiming to have at least £100k revenue per FTE - if you are not there with your team then some time should be focused on making sure that they are set up to be revenue and profit generating regardless of their role. And making sure that are managed and held accountable to their own metrics to ensure that is the case.
There are of course other things that you can and should track, things like your total audience over all platforms, and the number of people on your email list. As well as any launch or campaign specific data.I hope that this episode has been useful for understanding the key numbers to track in your online business.
Thank’s so much for listening, until next time, let’s find the clarity in your numbers, increase your wealth and have more money in your pockets.
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