If you’re a math student looking into the business world, certain equations can help you understand how businesses operate. If you’ve started a business, you’re probably trying to figure out the best way to track your personal success. Let’s hope that you are earning money and improving as time goes by because those are the cornerstones to business success. If those things are true, congratulations! Now, how do you figure out if you’re doing well or just slowly improving? The answer is: Use math! Let’s take a look at three of the most important equations for tracking business success.
Projected income is the first equation, and it’s a forward-looking examination of a business’s profit. Projected income takes a look at customers that a business has developed and maintained and how much income they can expect from them over a set period of time. This is a speculative measure, but it takes a look back at the customer’s prior payments and predicts their future potential. Once the speculation is matched up with the potential for organic growth (by examining any potential new clients and the earnings they will bring), the business can start to make an educated guess of how much income it can expect in a certain period of time. It’s important to use the customer-retention-rate formula to help measure if the customers they retain have matched their projections.
Another key metric is the marketing ROI. ROI is return on investment, and it is especially important for examining marketing strategies. You need to know if your business is truly profiting from the marketing you’ve undertaken. If it is, you can be confident that you will gain more traction and therefore more income because you have an acceptable marketing strategy. If you’re not getting a great return on your investment, it may be time to change tactics because you need to show improvement and can’t be wasting money with an ineffective marketing strategy.
Finally, you want to examine YOY growth. If you’ve been in business long enough to have several years of work under your belt, you can take a look historically and see what you’ve accomplished and use it to speculate future growth. Use these simple steps for calculating YOY growth. For instance, if you’ve grown 5% on average each of the previous three years, you can expect to grow a similar amount by taking the same steps. If you want to show improvement, you can boost what you’re doing in terms of marketing and other measures and use that number as a baseline.
Whatever you’re planning with your business, it’s important to see where you’re excelling and what struggles you may have. If you’re interested in even more math to help quantify your business success, dive into some of these deeper equations. These equations can help you figure out how to accelerate your business and capitalize on your earnings and growth.