Inflation rates are making headlines, but smart business owners know there's more to watch than just inflation numbers. Join us as we explore 5 Key Performance Indicators (KPIs) that can help you steer your business through economic turbulence. From Gross Profit Margin to Customer Retention Rate, these KPIs offer insights that can empower your decision-making. In this video, we break down each KPI's significance and how they can guide you to success amidst inflation's impact. Don't let economic uncertainties hold you back—discover the KPIs that matter most!
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Episode Show Notes :
Inflation was at 3.18% in July which is lower than high of 8.5% last year, Fed expects it to be at 2% so they continue to increase the interest rates which drives up the price of products and services.
Demand was higher than supply - drove inflation up//
Gross Profit Margin: Gross profit margin is the percentage of revenue that remains after subtracting the cost of goods sold (COGS). Inflation can lead to increased costs for raw materials, production, or inventory, which can directly impact your gross profit margin. Monitoring this KPI can help you understand if your profit margins are being squeezed due to increased expenses.
Operating Expense Ratio: The operating expense ratio is the proportion of operating expenses to your total revenue. Inflation can result in rising costs across various operational areas, such as wages, rent, utilities, and supplies. By tracking the operating expense ratio, you can determine if these expenses are increasing disproportionately to your revenue growth.
Customer Acquisition Cost (CAC): Inflation can affect the cost of acquiring new customers. CAC measures the average cost incurred to acquire a new customer, including marketing and advertising expenses. If inflation is impacting your marketing expenses or increasing customer acquisition costs, monitoring this KPI can help you evaluate the effectiveness of your strategies and assess the impact on your business.
Cash Flow: Cash flow is the net amount of cash generated or consumed by your business over a specific period. Inflation can influence the purchasing power of your revenue and affect your ability to cover expenses and investments. Monitoring cash flow allows you to assess whether inflation is impacting your business's liquidity and financial stability.
Customer Retention Rate: Inflation can influence customer behavior and purchasing decisions. Tracking your customer retention rate helps you understand if your customers are staying loyal to your business or if inflation is causing them to seek alternatives due to rising prices. A decline in customer retention may indicate the impact of inflation on your business.