You CANNOT quit your day job until you can track these numbers in your biz. These numbers tell you where you need to focus before scaling. Have these down, and the path to making crazy money will become simpler in any business. 1. Lifetime Gross Profit: How much money you make in profit from each customer who comes into a business over the time they stay. EQUATION: LTGP = How much a customer pays you - cost of goods sold (what it cost you to deliver the product) EXAMPLE: - One employee costs $4,000/month - One employee handles 10 customers - Those 10 customers generate $10,000/month $10,000 - $4,000 = 6,000 Gross profit per customer per month $6,000 ÷ 10 = $600 Average lifetime (from churn example LGP = $600/month × 10 months = $6,000 2. Cost of Acquiring Customer (CAC): The total cost for a business to get one person in the door. That's marketing, sales, commissions, everything together, one number. EQUATION: CAC = Total costs to acquire customers ÷ Customers acquired EXAMPLE: - Labor: $5,000/month - Ads + software: $5,000/month - Total: $10,000 - Customers acquired: 83 $10,000 ÷ 83 = $120.48 CAC 3. LTGP to CAC Ratio: Lifetime Gross Profit to CAC. For every dollar you spend, how much do you make? It's arguably the most important metric in a business. EQUATION: Lifetime Gross Profit ÷ CAC EXAMPLE: - LGP: $6,000 - CAC: $1,224 6,000 ÷ 1,224 = 5:1 4. Churn: Of the people at the beginning of the month, how many of them are still there 30 days later? EQUATION: Churn% = (Customers at start who are gone by end) ÷ (Customers at start) EXAMPLE: Start: 100 Start of the Month, 10 of those 100 Next Month Churn (Leave) = 10/100 = 10% 5. Return on Invested Capital (ROIC): How much money does it cost us to expand the business and continue to make money? EQUATION: Annual Profit at Capacity ÷ Capital Invested EXAMPLE: - Cost to open location: $10,000 - Annual profit at capacity: $80,000 - - $80,000 ÷ $10,000 = 8:1 return