When launching, loan broker business owners are focused on establishing those first few critical connections with bankers, lenders and borrowers. When they are putting so much of their time into networking and creating a foundation for their business, many brokers overlook the benefits of metrics and analytics in business growth and beyond.
There are some key metrics that we feel every loan broker business should be monitoring at the start of their business and for the life of the company. These metrics will allow you to watch your business grow and change. They provide the information that you will need to make smart decisions about the future of your company. Analytics can help to paint a picture of your business, provide a visual of your success, and give you valuable information that you won’t get anywhere else.
Key metrics are a business owner’s way of monitoring the health of their company. You can monitor analytics for every part of a loan broker business including cash flow, web traffic and operating margin. There are automated programs and services available to make tracking metrics quick and easy for businesses of any size. So often, small business owners do not record this data or they monitor it in such a haphazardly way that it becomes useless and confusing. Keep your success at the forefront by monitoring the following 5 key metrics from the beginning of your loan broker business and beyond.
Cash Flow is Key
Cash flow measures the money that comes into and out of your business. It provides you with the heartbeat of your company, making sure that at any time you have enough money to cover your immediate expenses. This is especially true for brokerages, which can often have long dry spells followed by large influxes of money when a large deal closes.
In a commercial loan broker business, accounts receivable will likely be a your monthly recurring income from prior factoring deals that you closed, or incoming funds from loans that have just recently closed. Due to the varying cash flow in this industry, carefully monitoring your A/R can become especially critical during your startup period.
Your accounts payable represents the amount of money that your loan broker business owes for bills, utilities and other business expenses. Theses are expenses that have not been paid yet, but are owed. During launch, balancing your A/R carefully against your A/P can be crucial before your first few big deals close. After that point your brokerage can build a reserve fund to handle the intermittent cash flow it experiences.
Customer Acquisition Cost (CAC)
Monitoring the actual cost of acquiring clients is an important key metric for commercial loan brokers. Look at the time it takes to build a relationship with a borrower, including the advertising and marketing costs, travel time for meetings and introductions and the all-important follow ups. All of this adds up to your customer acquisition cost. It is important to understand that a business with more room for spending should consider putting more funds toward acquiring clients. Running an organized loan broker business with a great budget will allow you to spend more on bringing in the clients and actually helping business owners in need.
Lifetime Value of a Client
Your clients become more valuable to your business when they are repeat customers. It is important to know that acquiring a new customer is always more expensive than keeping a loyal customer. Commercial loan brokers benefit from repeat borrowers because they avoid the expenses of recruiting new borrowers and essentially starting from scratch. At the beginning of your business, it may be hard to calculate the lifetime value of a client, and so you may need to make some assumptions before you will be able to really see the trends in your spending and client acquisitions. But by starting your tracking from day one you give yourself a leg up over the competition, allowing you to more quickly reach the true average lifetime value of a client for your company.