In the world of accounting, knowing how much money you make is really important.
But it’s not just about the big number.
It’s about how quickly it comes in, what you might be losing, and where the important money stuff happens.
To understand how well your accounting business is doing financially, focus on three key numbers.
1. Monthly Recurring Money (MRR)
What is it?
MRR tells you how good your business is at keeping money coming in. It looks at money you got from clients last month, the money you expect from them this month, and money you might lose if clients leave.
Why is it important?
MRR helps predict how much money you’ll keep making. It’s like a steady income source, and you don’t have to keep looking for new clients all the time.
Example:
If you have 35 clients, and they each pay $1,000 every month, your MRR is $35,000. If two more clients start paying $1,000 each next month, your MRR goes up to $37,000, and you’d make $444,000 in a year.
2. Average Money from Each Client (ARPC)
What is it?
ARPC tells you how much each client pays you on average.
Why is it important?
ARPC helps you see if your business is growing. It tells you if you’re going after clients who pay more or if you’re working with lots of clients who pay a bit less.
Example:
If you have 35 clients and you’re making $37,200 each month, your ARPC is about $1,063. You can watch how this number changes over time to see if you’re reaching your ideal clients.
3. Extra Money from Existing Clients (Expansion MRR)
What is it?
Expansion MRR is when your current clients start paying you more. If they ask for more services, it means extra money for you.
Why is it important?
This shows how good you are at selling more stuff to clients you already have. It’s usually cheaper and easier than finding new clients.
Example:
If two clients start paying you an extra $500 each for more services, and another client pays you an extra $200, your Expansion MRR is $1,200.
These numbers are like your business’s pulse.
They tell you how stable your money is, how much your business can grow, and how well you’re doing at giving clients what they want. By keeping an eye on MRR, ARPC, and Expansion MRR, you’ll be better at making decisions and guiding your business to financial success.
Learning these numbers well is the first step to making your accounting business’s money health better. Keep watching them closely, and you’ll be on your way to reaching your financial goals.
We are happy to help with any questions you might have, as well as your accounting, tax and payroll needs.
Piligrim Accounting Inc. – (416) 514-1741 or info@piligrim-accounting.com
