When running a business, having accurate data is a huge advantage. But let's be real, numbers can feel overwhelming, especially when you're focused on growing your business. So let’s simplify things! Today I’m going to break down four revenue related KPIs to help you navigate tracking your efforts and make smarter, more confident decisions.

1. Monthly Recurring Revenue (MRR)

MRR is the total ongoing monthly revenue you generate from subscriptions, memberships, and ongoing service contracts. It's most common in businesses like:

• Software as a Service (SaaS) companies
• Subscriptions
• Memberships
• Retainer-based consulting services

How to Calculate MRR:

Multiply the number of paying customers by the amount they are paying every month. If you have different levels or offerings, you’ll want to break these down by each category.

Examples:

• If you have a membership that costs $50/month with 100 customers your MRR would be $5,000
• If you have 12 retainer clients with monthly fees ranging from $400-$2000, you would add up all of those fees to calculate your MMR

Tips to help you track MRR:

1. Track MRR consistently, making sure to adjust for price increases, new clients, contracts expiring, and any other changes
2. Use it to forecast future revenue, and to consider spending and investments you can afford
3. Identify trends in customer retention

2. Customer Lifetime Value (CLV)

Customer Lifetime Value measures how much a customer is financially worth throughout their entire relationship with your business—not just from a single purchase.

This KPI is crucial for businesses like:

• E-commerce stores
• Coaching and consulting services
• Retail businesses
• Agencies
• Subscription-based services

Why CLV matters:

• Helps you understand how much you can spend to acquire a customer
• Shows the long-term value of customer relationships
• Guides marketing and retention strategies

Examples:

• If a customer stays with you for two years and spends $100 monthly, their CLV is $2,400
• If you’re a product based business and a client has purchased $432 worth of products from you over the last year, their CLV is $432

3. Gross Profit Margin

Gross Profit Margin tells you how efficiently your business turns revenue into profit. It's more than just a number—it's a health check that can tell you a lot about your business.

How to Calculate Gross Profit Margin:

Gross Profit Margin = (Total Revenue - Cost of Goods Sold) / Total Revenue × 100

Red Flags:

• Consistently low margin (below 20%)
• Margins dropping over time
• Costs increasing faster than revenue

Example:

If you sell $10,000 worth of products and it costs you $6,000 to produce them, your gross profit margin is 40%. That means for every dollar you earn, you keep 40 cents.

**This is not to be confused with Net ProfitMargin, which is your profit percentage after ALL your expenses, including bothCosts of Goods Sold AND Operating Expenses. Gross Profit Margin is your profitafter just taking into account COGS. Both of these are important to consider, but Gross Profit Margin tends to get ignored and can tell you valuable data!**

4. Customer Acquisition Cost (CAC)

Customer Acquisition Cost shows exactly how much you're spending to win each new customer. It's crucial for ensuring your marketing efforts are actually profitable.

How to Calculate CAC:

Total Advertising + Marketing Expenses ÷ Number of New Customers Acquired

Tips for Reducing CAC:

1. Optimize your marketing channels
2. Improve conversion rates
3. Develop strong referral programs
4. Focus on targeted marketing
5. Leverage organic marketing strategies

Red Flag: If your CAC is higher than the lifetime value of a customer, you're losing money with each new sale.

These four KPIs might seem intimidating, but once you understand them, they can help you make data driven decisions within your business. Tracking doesn't have to be complicated—start simple, be consistent, and watch your business insights grow.

And you don’t have to start all at once! Pick one KPI to start tracking this month. Your future self will thank you!

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Annie Hillman is the founder and CEO of 1428 Financial. While finishing her college degree, she took a temporary accounting job and instantly fell in love with accounting. She worked her way up to staff accountant and stayed there until starting her business in 2020. Now, she spends her days helping business owners treat numbers like a tool, not a threat so they can run empowered, profitable businesses with calm confidence. She helps business owners embrace numbers, increase profits, and stress way less with monthly money management. Besides crunching your numbers, she loves fitness, baking bread, and hanging with her fam.

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