The key financial metrics you should know to measure cashflow
Do you know your key numbers? We asked start-up founders to tell us the figures they need to hand to run their businesses
What are the numbers you need to know most in your business? Understanding this can ensure you channel your energy into the right areas.
We spoke to three start-ups, who shared what they feel they need to know on a daily basis.
Wonderush is a monthly subscription to lifestyle activities, so depends on finding and keeping members. For founder Nelson Sivalingam the key levers for the business are the lifetime value of a member and the churn rate. Due to the cost of acquiring a new member, retaining users is essential if the business is to perform well financially.
“It costs a certain amount of money to acquire these members and we need to make sure at the very least they’re staying long enough to pay for the acquisition cost,” he says.
“But beyond that how do we build a great product that people want to stay with, which is really the most difficult part of the business. There are certain key metrics that you need to know and you need to be on top of. And if those metrics tally up you’ve got a business that works.”
To ensure his team understand the company’s state at all times, Sivalingam uses a platform called Geckoboard to display the numbers on a big screen in the office.
“Every day when the guys come in they can see the numbers, from user acquisition costs to conversions of someone that visits our site to the sign-up. We know those are the metrics that are going to make this business work.”
For textiles designer Lorna Syson knowing what’s in the bank is one thing, but having sight of what’s going to leave and when such as VAT returns, as well as who owes the company money are three things she needs to know at all times.
Her software provides her with a list of the top five customers that are overdue paying or are due to pay imminently. She uses this information to immediately fire off email reminders or make calls.
In addition to Syson’s list, Magic Whiteboard founder Neil Westwood points to the amount of profit the company makes each month as well as wanting to know the period’s sales levels and how they compare.
This film was produced in partnership with Sage One. For more business insight and tips to keep on top of cashflow and small business tax visit the Sage business blog http://uk.sageone.com/blog/.
For a free trial of Sage One please visit http://uk.sageone.com/products/.