2021 will come with important challenges for your company. Are you ready?
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December 21, 2020 3 min read
Opinions expressed by Entrepreneur contributors are their own.
The end of an extremely complicated year is coming for startups (and for everyone), for 2021 there are important challenges for your company. Although the global health situation is expected to improve significantly, the highest priority will be to provide clients and prospects with all the assistance they need, in this scenario companies will slowly recover, although volumes or cash flow could not be Get closer to pre-COVID-19 previews.
According to data from the Bank of Mexico, it was estimated that the Mexican economy will close this year with an accumulated fall of -9% and that for next year a growth of 3.34% is estimated, considering an inflation of 3.60%. In this scenario, more than ever, you should be prepared and for this, consider the following metrics to know your company’s health and implement the best strategy for 2021 in this scenario:
Consider the Customer Acquisition Cost , it is the set of investments made to convince a lead to become a customer, this is an essential financial indicator for the health of your startup. It’s a measure that speaks to the efficiency of your marketing efforts and is much more meaningful when combined with other metrics.
Customer retention rate. How many clients did you manage to retain this year? Acquiring a client is very important, but retaining it and especially in these circumstances is much more so. It is the index that measures the loyalty of customers to your company over a period of time and there are various methodologies to obtain this percentage.
Otherwise, did the pandemic make you lose customers? You must consider your churn rate, the rate of customers who unsubscribe (either from a subscription list or from any other type of database).
Another relevant piece of information to consider is the lifetime value , that is, how much money each customer brings to the company from the moment it is acquired until the moment they stop buying. The ratio of CAC to LTV is an essential metric. It is an indicator of the sustainability of the company.
CAC recovery time. This KPI measures how long it takes for a customer to generate enough net income to cover the CAC. That payback time has a direct impact on cash flow.
General expenses or overhead that measure the fixed expenses of a company. It is a fact that you should always take into account. To this we can add the monthly negative cash flow, if you can understand your earnings and expenses (fixed and variable) you can calculate the monthly negative cash flow.
Total budget. This term is critical for the survival of any startup, with or without a pandemic and is better known in the world of entrepreneurship as the runway, it measures the time that cash lasts, expressed in months. Consider this information especially if you intend to raise capital, do not wait until the end when you no longer have money, it is best to have a runaway for 12 and if possible 18 months.
Finally, consider the profit margin, since this metric will allow you to consider the ROI (Return on investment) important to understand the scalability and sustainability of your company.
There are some more indicators that are necessary, to obtain a comprehensive analysis of them we suggest you accompany an expert and guarantee the health of your company.