9 Key Metrics To Keep An Eye On For The Road To Business Success
Keeping a track of every business parameter is not possible, hence you need to focus on your business’ pulse i.e. the key metrics. KPIs help you to measure business success.
How do you measure your business performance?— The best way NOT TO DO this is by following your GUT feeling. Operating a successful business requires a thorough analysis of the work, financial and sales results. It can’t be done without tracking significant your business’ key metrics.
Therefore, it’s essential to understand these key metrics which can tell you about the health of your company and help you monitor the performance on an ongoing basis. This will empower you to make sounder decisions, as well as plan proactively for the future.
So, what are these Business Metrics?
Business metrics or Key Performance Indicators demonstrate a measurable value that shows the development of a company’s business goals which are usually tracked on a KPI dashboard. They indicate whether a company has accomplished its goals in a planned time frame.
But the catch is, you have to only monitor relevant key metrics for business depending on your operations. Tracking irrelevant KPIs will divert you from focusing on the things that truly matter, so you must choose the right ones to perceive. Here we have jotted down a list of 9 key metrics that you should track without thinking:
1. Sales Revenue
Did you know that about 28% of businesses fail due to problems related to the financial structure of the company? This includes keeping poor accounting records. We gave this metric priority as it can tell a lot of things about your company. If you don’t understand your key financial metrics, you will not be able to monitor your business’s health.
When evaluating your sales revenue and setting goals, it is important to remember that sales results are affected by multiple other factors. Consequently, the person tracking the sales KPIs should also be aware of recent changes in the market, previous marketing campaigns, competitive actions, etc.
2. Gross Margin
Higher gross margin means that your company is earning more by each sales dollar and you can now invest it in other operations. This metric is exceptionally important for emerging companies as it reflects on improved production and processes.
3. Cost of Customer Acquisition
CAC is calculated by dividing all the costs spent on obtaining new customers (marketing expenses) by the number of new clients acquired in a specific time frame.
The Cost of Customer Acquisition should always be measured together with the Customer Lifetime Value.
4. Net Profit Margin
This metric signifies how good is your company in generating profit compared to its revenue. This number tells you how big a sum of each dollar earned translates into profits.
It is a great way to predict long-term business growth, and see whether your income exceeds the costs of running the business.
5. Sales Growth Year-to-date
Everyone loves to see their company grow month-over-month, but sometimes, sales are highly dependent on the mood of the customers and season.
Sales Growth Year-to-date indicates the pace at which your company’s sales revenue is increasing or decreasing. Monitoring your sales growth over various periods will give you a better understanding of where your company stands in the market.
6. Qualified leads per month
With your company’s growth, you’ll be able to invest more resources in sales and marketing and soon you’ll be going to have hundreds of new leads each month. But not all of these leads turn into customers. That’s why you need to measure the number of qualified leads per month.
You can categorize your new leads into three different groups:
- Marketing qualified leads (MQL) – leads that are qualified by the marketing team on the premises that they match your potential lead requirements.
- Sales-accepted leads (SAL) – leads that the marketing team has forwarded to the sales team, and are waiting for the final approval before the sales process begins.
- Sales qualified leads (SQL) – leads qualified by the sales team that has the highest potential of becoming paying customers.
7. Lead-to-Client Conversion Rate
Your potential leads have to be contacted by your sales team to turn them into paying clients. The Lead-to-Conversion business metric reflects on your sales team’s performance. Moreover, it might indicate the quality of your product such as if leads fail to convert, this means your client might not be impressed with what you’re offering.
8. Monthly website traffic
One of the best indicators of your company’s reputation is the monthly website traffic. The more people hear about your product, the more likely they are to check out your website.
9. Employee Happiness
It is a true notion that happy employees turn into productive employees. The research suggested that your employees will work 12% more effectively when they’re happy at work. Keeping their satisfaction level high will lead to a long-term commitment to your team and company. That’s why it’s important to regularly check whether your employees are happy and feel rewarded for their work.
How to choose the right KPIs?
Ensure that every single one of your business metrics meets the SMART criteria: Specific, Measurable, Attainable, Relevant and Time-Bound
You also need to understand that, KPIs are different for each industry according to their growth stage, and project phase. You must follow the industry standards and choose those KPIs only which match with your business’ goals and objectives. Do remember that the metrics you measure will change as your company grows and scales.
Leading a successful business is easier when you use key metrics that provide a graphical overview. You’ll get insight into historical trends, problem areas and current progress; and can use this information to maintain sustainable growth.
