4 Key Performance Indicators (KPIs) To Grow Any Business

Trying to guess what your customers or users want is a great way to destroy your business. Using data to learn can help you to do the opposite.

Most successful businesses want to collect as much data as they can. They have an endless list of different Key Performance Indicators (KPIs) to analyze, There are a bunch of data you can analyze. Yet, I believe there are four KPIs need to pay attention to if you want to grow your business.

1. CPA (Cost Per Acquisition)

You need to have users paying you money if you want to build a profitable business. It doesn’t matter if you created a product or are providing a service. Everything you do is to generate value for someone. You must know who your customer is so that you can give the best experience for them.

After you know who your customer is, you have to acquire them. There are different ways to do that.

You can try acquiring users organically by creating content on YouTube and Instagram, for example. When you work that way, you have less control over the number of users to acquire. You become dependent on the reach you have in the platforms you are creating content with. It’s harder to scale your business with this strategy.

You can also pay to acquire users by using tools like Google Ads or Facebook Ads. When you work that way, you have more control over the number of users to acquire. You become dependent on the money you have to spend to acquire new users. It’s easier to scale your business with this strategy.

CPA means how much money you spend to acquire one user. To lower it, you can improve your free content or your creatives for paid user acquisition. That involves a lot of testing to find out what works best for your audience.

There is no better strategy between organically and paid, though. You need to understand what is best for your business. Nevertheless, both strategies have a CPA. Different profiles and regions have different CPAs too.

A cheaper CPA isn’t necessarily a better one. It depends if your CPA is lower than your LTV or not.

2. LTV (LifeTime Value)

You may have thousands to millions of users and still are not able to make money from them.

LTV means how much a user spends with your product or service. A user can spend a lot of money once or small amounts many times. Each business works differently.

To increase your LTV, you have to improve your product or service. You can also look for ways to increase the number of paying users/customers or the average revenue per paying user. There is no correct answer here. You need to know what are the benchmarks for your industry.

Another way to increase your LTV is by decreasing your churn rate.

3. Churn Rate

You may have acquired many users or customers on day one, but they didn’t come back on day two. There is no way to build a profitable business like this.

Churn is the percentage of users that leave your business after some time. Again, different industries have different benchmarks. You need to know the one for your business and work to have a number lower than the benchmark.

One of the reasons they don’t come back to a product or service is that they are not the right customers. You may have acquired them, but they are not a good fit for your business. You can look to your acquisition strategy to reduce the churn rate by acquiring the right users.

Another reason for customers to not come back to what you are providing is because they didn’t like what they saw. That hurts, but it’s true. You may have acquired the right customers, but they don’t like what you are providing. If that’s your case, you have to find ways to improve your product or service.

Churn is like a hole in a bucket. It doesn’t matter if you put a lot of water (acquire many users/customers) if the hole (churn rate) is enormous. Most of the time is better to reduce the hole (churn rate) first. That will increase your LTV. Decreasing churn by 10% can double your LTV.

Another way to decrease your churn is by increasing your NPS.

4. NPS (Net Promoter Score)

Understanding how your customer is experiencing your product or service is vital for your business.

NPS is a management tool used to measure customer loyalty. The more a customer uses a product, the more likely he is to refer it to other people.

To learn your NPS, you have to contact your users and send them your NPS survey. The ratings go from 0 to 10. There are three types of customers:

1. Promoters (9 or 10)
2. Passives (7 or 8)
3. Detractors (6 or below)

Having more people referring to your product or service can decrease your CPA, as you can acquire more free users. The NPS is also an excellent indicator of how your customer views your product or service. That can increase your LTV.

If your rating isn’t good, you have to find ways to improve what you’re doing. That is not a survey you do once and forget about it. You should run it frequently to keep providing the best experience for your users and customers.

Always remember who you are building your product or service for. Keep in touch with your customers so you can keep improving their experience. That can help you build a profitable business.

Final Thoughts

It’s much more challenging to build something valuable for your customer by guessing. That’s why you must use data to learn. You need to pay attention to these four KPIs.

There is no time to be guessing. We need to be fast and use data to learn to provide a better experience for our users and customers.

Different KPIs affect different KPIs. Remember to improve the experience of your users or customers. That will help you increase your NPS and, with that, increase your LTV. If your users spend more money with you (LTV) than you pay to acquire them (CPA), you can have a profitable business.