The 3 Metrics That Predict Your Business Future

Most entrepreneurs I talk to can tell me their revenue, their follower count, and how many customers they have. But ask them about the three numbers that actually predict whether their business Is sustainable, and the conversation stops. This is not the fun part of owning and running a business, but you need to know your numbers in order to be successful.

These three metrics work whether you're consulting or selling products online. They separate businesses that survive from those that don't.

Metric 1: How Long to Get Your Money Back

Every customer costs money to acquire. The question is: how long before that customer pays you back through profit? In more technical terms, the metric is 'Customer Acquisition Cost (CAC)'. We'll be comparing that number to the amount of Profit (not revenue) from each order and determining how long it takes to recover your CAC.

New Consultant:

• Customer acquisition cost: $1,200 (online marketing)

• 3-month project fee: $6,000

• Monthly revenue: $2,000 ($6,000 ÷ 3 months)

• Monthly profit: $1,600 ($1,200 cost ÷ 3 months = 80% margin)

• Payback period: 0.75 months ($1,200 ÷ $1,600)

Established Consultant:

• Customer acquisition cost: $300 (referrals)

• 3-month project fee: $15,000

• Monthly revenue: $5,000 ($15,000 ÷ 3 months)

• Monthly profit: $4,900 ($300 cost ÷ 3 months = 98% margin)

• Payback period: 0.06 months ($300 ÷ $4,900)

Online Store (products require including cost of goods sold in calculation):

• Average order value: $200

• Customer acquisition cost: $20

• Cost of goods sold: $30

• Total costs per order: $50 (CAC and COGS)

• Profit per order: $150

• Margin: 75% ($150 ÷ $200)

Growth flywheel per sale (double inventory with each sale):

• $60 to make/buy 2 new products (2 × $30 COGS)

• $40 for marketing those 2 products (2 × $20 CAC)

• Total reinvestment: $100

• Net profit: $50

Each sale doubles inventory capacity while providing marketing budget and $50 profit.

Why this matters: If it takes too long to recover inventory and acquisition costs, you'll run out of cash before you can grow.

Metric 2: Lifetime Value to Customer Acquisition Cost Ratio

How much profit will you make from a customer over their entire relationship compared to what you spent to get them?

New Consultant:

• Average relationship: 2.5 projects over 18 months

• Total revenue: $15,000 (2.5 × $6,000)

• One-time acquisition cost: $1,200

• Total profit: $13,800 ($15,000 - $1,200)

• Ratio: 11.5 to 1 ($13,800 ÷ $1,200)

Established Consultant:

• Average relationship: 4 projects over 24 months

• Total revenue: $60,000 (4 × $15,000)

• One-time acquisition cost: $300

• Total profit: $59,700 ($60,000 - $300)

• Ratio: 199 to 1 ($59,700 ÷ $300)

Online Store:

• Average customer: 3.5 purchases over 24 months

• Order value: $200 per purchase

• Total revenue: $700 (3.5 × $200)

• One-time acquisition cost: $20

• Total COGS: $105 (3.5 × $30)

• Total profit: $575 ($700 - $20 - $105)

• Ratio: 28.75 to 1 ($575 ÷ $20)

Why this matters: If you make $5 for every $1 you spend on customers, you can reinvest and grow. If you make $0.50, you're going out of business.

Metric 3: Gross Profit Margin

What percentage of revenue becomes profit after direct costs to deliver your service or product? This doesn't include operating expenses like rent, salaries, or marketing - just the direct costs of fulfillment.

From our examples above:

• New Consultant: 80% margin

• Established Consultant: 98% margin

• Online Store: 75% margin

Target benchmarks:

• Consulting/Services: 70%+ (time-based work should have high margins)

• Product businesses: 50%+ (need room for inventory, fulfillment, returns)

• SaaS/Software: 80%+ (low marginal delivery costs)

Why this matters: High gross margins give you room to invest in growth, hire team members, handle problems, and weather tough times. Low margins mean you're always one issue away from trouble, and you can't afford to scale.

The Growth Pattern

Notice how both businesses improve over time:

• Customer acquisition costs drop dramatically

• Project values increase significantly

• Profit margins improve substantially

What to Do Right Now

1. Calculate your real customer acquisition cost (include all marketing, sales time, and tools)

   1. For product businesses, know your cost of goods sold (product cost, packaging, shipping, payment processing fees, etc)

2. Track customer lifetime value (total profit over entire relationship)

3. Know your gross profit margin after all direct costs

Next: Why revenue growth can be completely meaningless (and the numbers that actually matter).