Smart Ways to Measure the Growth and Value of Your Business

The modern business market is vast as well as competitive. This diverse nature is evident in the worldwide business revenue reports of 2.71 billion USD in 2022 [Statista]. 

But have you thought about what basis these reports are collected on? Or, how do businesses measure their own growth rate and market value? Besides that, different growth rate measures exist: Industry growth rate, seasonal growth, and compound annual growth rate (CAGR). 

All these terms seem confusing and might be misinterpreted. To know the approachable techniques for measuring the growth and value of your business, you can explore this article.

Here, I will elaborate on everything I learnt from the financial advisor practice valuation. Thus, you can continue reading till the end and then employ the effective ways in your business.

KEY TAKEAWAY

• Understand the real meaning of growth from a business perspective.
• Find the easy ways to track your firm’s development.
• Leverage some simple tools to predict the business value.

What “Growth” Really Means for Your Business Today

Most companies use the same growth formula every time:

Revenue growth rate = (Current period revenue — last period revenue) / Previous period revenue x 100%

While this is undoubtedly an essential element, relying solely on one element cannot provide in-depth insights. As a finance critic, I believe that a company’s “growth” rate needs to be evaluated against several other benchmarks. 

This organizational expansion is a matter of economic sustainability, profitability, and even customer lifetime value, which determines the continuous success.

Easy Ways to Track Your Business’s Progress

Start by utilizing key performance indicators (KPI) and tracking them in tools such as spreadsheets or dedicated software. These can be integrated with:

Financial Metrics

The financial metrics involve reporting cash flow, net profit, and the market value. These components help business leaders to strategically decide the required adjustments and performance evolutions. It ultimately allows them to aim for a big picture for long-term financial success. 

Operation Metrics

Even a medium-sized manufacturing business goes through different procedures. In this case, operational metrics count product costs, average lead response time, and, of course, production cost.  Using these insights, firms can identify the areas for improvement and adapt accordingly.

Customer Metrics

After the customers/clients receive service or a product, their reviews decide the future growth rate. Cross-selling is one of its techniques for increasing customer retention rates and generating new leads, eventually capturing a large share of the total market.

How to Understand the True Value of Your Business

“The price of anything is the amount of life you exchange for it.” — HENRY DAVID THOREAU.

The true value of a business can be estimated by employing professional valuation techniques. Considering all the aspects, namely assets, market position, and prospects, one can implement common approaches.

Simply subtracting liabilities calculates the net value of the business’s both visible and immeasurable assets. Afterward, move forward to the comparison of the same set of businesses’ price-to-earnings ratios in the market-based valuation. 

At last, these methods of cash flow analysis present the value for future anticipation.

Simple Tools That Make Measuring Growth Easier

Tools make the search and analytical procedures effortless; utilize them for better data evaluation.

1. Use Google Analytics for website traffic, conversion rates, user behavior, and data visualization.
2. QuickBooks is widely popular for cash flow management and automated tax reporting.
3. Feedier provides customer feedback management and user behavior analysis.
4. For sales pipeline tracking and lead management, consider HubSpot CRM.
5. Don’t forget SEMrush for the overall online performance monitoring of a company website.

These platforms offer proper insights into every activity, which you can leverage to predict the business value.

Signs Your Business Is Moving in the Right Direction

The first sign of a thriving business is determined through its financial health. See, in business:

Strong Financial Health = Better Growth Opportunity

This means businesses that continuously generate healthy profits have a strong cash flow, higher demand, and meet the essential metrics.

Just regularly give these signs a look, and implement necessary alterations to be the next outstanding firm in the marketplace.

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