By Mark Tepper, an EO Cleveland member and president of Strategic Wealth Partners
The most powerful metrics in any business are ratios that express your performance on metric A as it relates to metric B. For example, knowing what your revenue was last year is interesting; but knowing what your revenue per employee was will give you a sense of how efficient your business is at leveraging your investment in people.
If you’re a retailer, knowing what your sales were last year is far less useful than knowing what your sales per square foot were, as this measures your effectiveness at leveraging your investment in retail space.
One of the most important ratios to keep an eye on is your ratio of CUF:CAC. CUF stands for Cash Up Front, and it is the amount of money you get from a customer when they decide to buy. CAC stands for Customer Acquisition Cost, and it is the amount of money you need to invest in sales and marketing to win a new customer.
Improving your CUF:CAC ratio can ensure that you have the cash to grow your business without having to rely heavily on outside sources of capital.
To understand the CUF:CAC ratio, let’s first look at HubSpot.com. HubSpot is a software business that provides a platform for businesses to manage all of their marketing. HubSpot allows businesses to build a website, set up a blog, manage their social media accounts, create email marketing campaigns, and analyze it all through a single dashboard. It’s an all-in-one marketing platform for businesses, and HubSpot’s typical customer is a small to mid-sized company that needs to present a professional online image but doesn’t have the necessary internal resources or the budget to hire a team of designers.