An efficient operation is one key to a startup’s success.
Here are operational metrics you can use to check your startup:
Basic efficiency – measures the overall efficiency of the business.
To calculate, take operating expenses divided by the revenues.
The smaller the number, the more efficient the business.
Marketing efficiency – measures the efficiency in acquiring new customers.
To calculate, take the monthly marketing spend and divide by the number of new customers signed up.
The smaller the number, the more efficient the marketing.
Sales efficiency – measures the number of leads that turn into customers.
To calculate, divide the total sales by number of leads and multiply by 100.
This is sometimes called the magic number.
Inventory turnover ratio – measures the efficiency of inventory.
To calculate, divide the cost of goods sold by the average inventory.
Ten is a good result as it shows a turnover of inventory almost every month.
Accounts payable to sales – measures how much of suppliers’ money you use to fund sales.
To calculate, divide accounts payable by annual net sales.
Use these tools to calculate your operational efficiency.
Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.
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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.