5 Key Metrics for Tracking Revenue
As the saying goes, "time is money." Business owners and marketers are always spending time trying to track business performance - but tracking the wrong metrics or too many metrics just wastes time.
Many of us get side-tracked by vanity metrics: Facebook follower counts or homepage views, or those magical ad "impressions." Though these metrics can be helpful, they aren't necessarily correlated with revenue. Let's look at more meaningful metrics to help drive revenue.
Here are the 5 key metrics to watch when you're tracking marketing tied to revenue.
These metrics can be pulled from the system you're using, but for HubSpot CRM and Marketing Hub users, all of the following are available "ready-to-go" in your reporting tools.
→Read Now: 10 Sales Metrics to Track in Hubspot
1. Monthly Recurring Revenue (MRR)
Monthly recurring revenue is the amount of revenue you generate each month by selling your product(s) and/or service(s). When tracking financial performance, this metric is one of the most important to think about and analyze.
Tracking this metric month-over-month can be a game-changer - weekly is often too short to gather meaningful data, while quarterly and yearly are too long to take corrective action. Monthly hits a sweet spot of enough time to draw conclusions, but not too much time that you're letting ineffective practices run too long.
It's kind of a no-brainer that you'd want the highest amount of monthly recurring revenue possible, but every business is different, which is why you should be focused on competing against yourself and comparing your current revenue growth to YOUR past financial performance - rather than comparing to competitors.
This is key because you don't want to waste valuable time chasing unattainable goals, missing sales targets or burning out employees. Monthly recurring revenue isn't a particularly useful marketing metric on its own, but when combined with other sales and marketing data, it can illuminate areas of current friction and areas of potential growth.
➤ Tutorial: Track Recurring Revenue in HubSpot
2. Revenue Churn
Revenue churn is the amount of revenue you've lost, typically measured monthly. Revenue Churn's close cousin, Customer churn (the number of customers you've lost) is also typically tracked by businesses. However, I often find revenue churn to be the more valuable of these two.
Consider two scenarios: one where you lose 5 customers, who each pay $500 per month; and one where you lose one customer who pays $4,000 per month. From a revenue standpoint, you're going to feel that one big customer's loss more. For that reason, looking at revenue churn on a monthly basis is critical. From there you can do a more qualitative analysis of what caused those losses.
➤ Tutorial: How to Calculate Churn Rate in HubSpot
3. Conversion Rate by Funnel Stage
Conversion rate is the number of people who take a desired action. When we're talking revenue metrics, we want to narrow our focus to revenue-driving activities. Depending on your business, some common actions to watch include:
- Signed up for a free trial
- Signed up for a paid trial
- Booked a demo
- Purchased product(s) online
- Purchased products(s) in person
- Signed up for a monthly program
- Returned to a shopping cart and purchased items
This is where you'll need to refer back to your sales funnel and stages. For example, a SaaS company might have a typical sales funnel of: Sign Up for a Free Trial > Book a Demo > Purchase Product. You want to track the conversion rate at each stage of that funnel.
The question then becomes: what's a "good" conversion rate? The averages across the board for sales funnels are 2-3% at each stage. That's the general range to aim for.
➤ Tutorial: Create Custom Funnel Reports in HubSpot
4. Average Customer Lifetime Value (LTV)
Average customer lifetime value (LTV) is the amount of revenue a business can expect from one user or customer throughout their lifespan at the company.
Tracking how much you're making is important, but when you want to look at more meaningful metrics, knowing exactly where and how recurring revenue falls amongst your customers is key. LTV shows you what you can expect to make from a typical customer over the course of their lifetime. Knowing LTV unlocks a lot of other key knowledge:
- Are you spending more trying to gain a new customer than you're making over their lifetime with you?
- Are your prices reasonable, considering the LTV? Or do you need to raise prices?
- What percentage of cost should you delegate to sales and marketing, relative to the LTV?
If you want to get really nerdy - which I recommend wholeheartedly - you can even break down LTV by subcategories like business size, industry or service(s)/product(s). Perhaps even by your personas. You don't want to go overboard or get stuck in reporting hell, but if you find that you have customers who bring in vastly different LTVs based on some of your subcategories, it can be even more useful to parse them out.
5. Deal Revenue Forecast
Deal revenue forecast is the forecasted revenue based on a contact's likelihood to close. Ok, so this one is a little bit more aspirational revenue than existing revenue, but it's also a critical metric to track, and one that sometimes gets ignored. Why? Well, sales wants to sell (obviously) and sometimes salespeople, in the fictional words of Dr. Ian Malcolm:
[They] were so preoccupied with whether they could, they didn’t stop to think if they should.
Sales are important, but are your salespeople spending more time closing a bunch of low-value, likely-to-churn leads, or are they spending their time on the contacts with higher deal-revenue forecast and higher LTV?
I know where I'd rather my sales team be spending their time.
→Read Now: How to Get Smarter Lead Tracking
➤ Tutorial: Use the Forecast Tool in HubSpot
With the seemingly endless amount of metrics to worry about, it can be difficult to know which are most beneficial to you. These metrics will not encompass everything, but they will help you focus in on the revenue metrics that matter the most, and get more from your time and money.
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BizzyWeb is a Minneapolis-based digital marketing and web design agency that helps companies get the high-quality leads they need to grow and thrive. Our tactics include inbound marketing, SEO, advertising, web design, content creation and sales automation. We are an accredited HubSpot Platinum Partner and we offer full-service HubSpot onboarding, enablement and strategy for new and current users.