helps business owners determine the longterm value of a customer .
To calculate CLV , multiply the average order value by the number of repeat purchases and the average customer retention period . By tracking CLV , business owners can identify opportunities to increase customer loyalty and retention .
Gross Margin
Pricing models need to be done using a science not feelings . Have an excel sheet at least that covers all basics before you add a percentage profit margin . Gross Margin is the amount of money that a business generates from sales after deducting the cost of goods sold ( COGS ). This metric is important because it helps business owners determine the profitability of their products or services .
To calculate Gross Margin , subtract the COGS from the total revenue and divide the result by the total revenue . By tracking Gross Margin , business owners can identify areas where they can reduce costs and increase profits .
Net Promoter Score ( NPS ) & Compliance
Net Promoter Score ( NPS ) is a metric that measures customer satisfaction and loyalty . It is based on the question , “ How likely is it that you would recommend our company / product / service to a friend or colleague ?”
How is your feedback mechanism ? Do you have a complaints , grievance and redress framework ? If no client shares about areas of improvement with your business be very afraid .
Customers can respond with a score from 0 to 10 , and the responses are categorized into three groups : promoters ( score 9-10 ), passives ( score 7-8 ), and detractors ( score 0-6 ). To calculate NPS , subtract the percentage of detractors from the percentage of promoters .
By tracking NPS , business owners can identify areas where they need to improve their customer experience and increase customer loyalty . Compliance to quality , safety , standards and industry regulations goes a long way to ensure continuity in your business . This will attract investors and canny clients who research on brands they engage and buy from . Compliance alone can win you a ton of loyal customers . We do have an informed customer base and thus they make calculated purchases .
Inventory Turnover Ratio
Inventory Turnover Ratio is a metric that measures how quickly a business is selling its inventory . It ’ s calculated by dividing cost of goods sold by the average inventory value during a specific period . This metric will help you strategize on your re-order levels . Question : if your suppliers cut short their supply how long will your current stock of raw material or shelf product last you ?
By tracking Inventory Turnover Ratio , business owners can determine whether they are stocking too much inventory or not enough . They can also identify which products are selling quickly and adjust their inventory levels accordingly .
Cash Flow
Cash is king . Business that run efficiently always have disposable cash that drives their service delivery . Cash Flow is a metric that measures the amount of cash that is coming in and going out of a business . It is important because it helps business owners determine whether they have enough cash on hand to cover their expenses . To calculate Cash Flow , subtract the total cash outflows from the total cash inflows during a specific period .
By monitoring key metrics Insynque is turning its sorry story of literally running out of breath into good business . Share with me your thoughts about this article . Also let me know what you would like to read from this column into the future .
Lunani Joseph is a Technology & Governance Professional . Currently serving as the County Executive Member for Transport & Infrastructure for Vihiga . You can commune withhim via email at : JLunani @ insynqueafrica . com , Instagram : @ lunanijoseph Twitter : @ joseph _ lunani LinkedIn : @ joseph-lunani .