Understand Five Key Metrics: A Startup Company Growth

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This is the beginning of a new startup company: After agreeing upon with your Hong Kong based co-founding partners of your new company with the business model/idea, vision, mission, and shares of the business, the next steps include completing the paperwork and legal work of your new company incorporation. There are quite a few Hong Kong company formation services that you may safely use for this purpose for a new Hong Kong company registration. It would usually include company secretary service, nominee service, annual return tax filing service, accounting service, and more.

The five key metrics

At first, the HK entrepreneur needs to know how to evaluate the bottom line of his business with financial income. Then it is the 5 metrics which include customer acquisition cost, customer lifetime value, burn rate, gross profit margin, and conversion rate that he needs to work out when he is growing the business.

The customer acquisition cost (or CAC) is the cost you actually have to pay when acquiring a new customer for your business. It is calculated by dividing the total cost that has been spent on the acquisition of the total number of new users over a fixed period.

The customer lifetime value (LV) is the total net profit contributed by a customer during his or her business relationship with the company.

Burn Rate happens when a company spends capital over a period of time.

Gross Profit Margin actually measures the revenues after the entrepreneur has paid the cost of operations.

Conversion Rate (CR) is measured through actions that some very specific customers have taken on your website. It may be calculated by dividing the number of conversions (i.e. specific actions taken) over the number of total website visitors.

Survey data collection and market data analysis

All companies (including Hong Kong companies and business established elsewhere) have to find different ways to survive and grow, whether it is a startup company, or a business that have already survived through the first two years. Look at the 2 aspects:

  • Collection of survey data
  • Analysis of market data

Collection of survey data: Begin with sending out survey questions through emails to your close contacts and newsletters to your customers (and/or people who have signed up but haven’t yet purchased anything from you). Startups may rely solely on the people connections of the founder and co-founders. The more established companies would rely on using market research agencies to get the job done.

Analysis of market data: You will have to not only look at but monitor your competitors. Mainly you would look for information and insights of the target markets and audience. The questions should include “Who do your competitors market to? Why do people choose to buy from a specific brand or website? Which products are mostly purchased?” Only when you are able to confidently answer the above questions, then this very task is complete.