As the Entrepreneur.com article “7 Simple Numbers That Will Grow Your Business explains, business is a numbers game, and to effectively manage the numbers you need to measure them first. Understand these simple metrics in order to recognize how you should manipulate your marketing and overall strategy to boost sales and profits:

1. The lifetime value of each customer. If your average customers spends $20 per purchase, buys three times a year and stays with you for five years, their lifetime value is $300 ($20 x 3 sales = $60 x 5 years = $3000). This helps you decide how much it’s worth to spend on marketing efforts to reach new customers.
2. How much it costs to acquire a new customer. If an advertisement costs you $200 and you get 20 responses and 10 sales, the cost for reaching each customer is $20 ($200/10 = $20). So, each transaction would have to result in at least  $20 in profits for your campaign to be worthwhile. If each sales significantly more than $20 in profits, you should most likely invest more in that type of advertising. If it’s less than $20 per sale in this example, you’ll need to adjust your strategy or scrap it entirely.
3. Conversion rates. If you pass out 1000 fliers and 100 of those leads make a purchase, your conversion is 10 percent (1000 leads /100 new customers = 10 percent conversion rate). “Knowing where you are is half the battle in getting to where you need to be,” Entrepreneur.com contributor Brad Sugars suggests. If you think your conversion rate seems low, start tweaking your marketing efforts and sales process to identify the flaw.
4. Your average dollar sale. Know how much each transaction is worth, and then try to boost it by focusing on add-ons and up-sells.
5. Response rates. Understanding response rates will help you determine which advertising media is a better value. For example, direct mail response rates usually range from 1 to 5 percent. Email response rates are typically just .1 percent or so. Compare your response rates, along with the cost to reach each customer, to help you decide which media to amp up and which you might want to do away with.

Click here to read the article from Inc.com.