15 Key Metrics Essential to Track for Business GrowthWritten by InvoiceBerry Team on September 29, 2022
All businesses must track some specific key business metrics to keep a check on the growth and performance of the business. For those who are new to the term, let’s define what key business metrics are. They are a quantifiable index of some component of your business. They help you track, keep a check on, and evaluate, the success or failure of these business components. A business metric is also known as a key performance indicator (KPI) or a business performance key metric.
Even today, many businesses are yet to realize the need to track different business metrics. We recommend it because they tell you if your strategy is succeeding or failing. They also indicate if you need to carry out any kind of modifications in order to boost your performance. They even aid you in measuring the total time it will take to reach your goals.
As it can be pretty challenging to stay on top of all critical business metrics, we are going to talk about which specific business metrics you should track for ensuring adequate business performance in this blog.
What Are the Examples of Key Metrics?
Here’s a list of 15 key business metrics that are important to track for business growth:
- Website Traffic
- Leads per Month
- Leads to Sales Conversion Rate
- Customer Acquisition Cost
- Customer Retention Rate
- Net Promoter Score
- Net Profit Margin
- Employee Satisfaction
- Customer Lifetime Value
- Progress Towards Deadlines and Goals
- Sales Revenue
- Cash Flow
- Overhead Costs
- Training Cost per Employee
- Employee Engagement
Note: The key business metrics you need to monitor differ from business to business. The metrics that you choose to track your business’s performance should be based on your business’s unique goals.
Let’s discuss the key metrics that are important to track for ensuring business growth!
1. Website Traffic
Website traffic is amongst the most important business performance metrics to monitor. While tracking this metric, don’t just check out plain traffic. You need to dig a little deeper and check out metrics like monthly traffic too.
As time progresses, your traffic numbers should increase. This will aid you in finding out if your best SEO practices and various other marketing efforts are effectively implemented or not.
Tip: Make it a point to check other traffic metrics also such as new vs returning visitors, session length, location, bounce rate, and sources to get a deeper understanding of your overall traffic.
Note: Traffic by itself means nothing. Do you know what matters more? If the traffic is rendering itself to increased conversion rates! We discuss this in detail in the following sections.
2. Leads Per Month
Leads per month are the number of individuals who sign up in a month. When we talk of sign-ups, it means sign-up to a demo, lead magnet, consultation call, or webinar.
Once you know how many leads you get in a month, you can determine the amount of traffic you need. For instance, for every 1000 visits, if you generate 50 leads in a month, then this means that your conversion rate is about 5%. Therefore, to get another 25 leads every month, you will need an additional 500 visits per month.
Tip: To quickly increase your conversion rate, you can think about directing traffic to a particular landing page as opposed to your website homepage. This could be a page for a recent upcoming event, a discount voucher for your services/products, or a page detailing your brand new schemes!
3. Leads to Sales Conversion Rate
Why do you need to track leads to sales conversion rate? Because not all leads will convert to sales. The leads to sales conversion rate is the number of sales divided by the number of leads multiplied by 100.
Let’s take an example to further understand this. If you generate 10 sales from 50 leads, your conversion rate will be 20%. Such data helps you improve your sales conversion rate, and even predict your traffic to sales conversion rate.
4. Customer Acquisition Cost
While wondering what are the key metrics to incorporate in your business plan, turn your attention to Customer Acquisition Cost (CAC). Also called the cost of customer acquisition, it is the total cost of marketing and sales over a particular period of time that goes towards acquiring a customer.
Now, how to calculate this cost? Simply take the complete amount spent on marketing and sales over a certain time period and divide it with the total count of customers acquired during that period.
The result of this calculation denotes how much it costs you to acquire one customer.
5. Customer Retention Rate
The customer retention rate is the percentage of customers retained by your company over a particular time period.
Now, you may wonder how to calculate it. You can do so by taking the number of customers at the end of a specific period and subtracting the count of new customers acquired in that period from it. Then, divide the result by the number of customers at the beginning of the period, and then multiply it by 100. There, you have your customer retention rate during that specific period!
Note: How you look at the user or customer retention rate is based on your business type. For example, for e-commerce stores, customer retention is the number of returning customers. For SaaS companies, on the other hand, it is the number of individuals who continue subscribing after their initial subscription runs out.
6. Net Promoter Score
A net promoter score is a metric that aids you in measuring the relationship of your customers with your company. The entire process of calculating the score is pretty simple. You ask your customers an important question, such as “how likely are you to recommend <your business name> to a friend or colleague?”, etc., to which they respond with a number on a scale of 1 to 10.
Once you get the answers, you subtract the percentage of detractors from the percentage of promoters to get the score, which ranges from -100 to +100.
The ones who rated 0-6 are the detractors.
The ones who rated 9 or 10 are the promoters.
The net promoter score depicts your customers’ satisfaction with your service and/or product. A score of +100 shows that all customers are promoters and a score of -100 shows that all customers are detractors.
The bottom line, you must try and get close to +100 to ensure long-term customer retention and satisfaction.
7. Net Profit Margin
When you use a metric called ‘net profit margin,’ you subtract the sales expenses of your business from the monthly revenue to know how much profit you earned.
Now, you may be thinking about the need to calculate the net profit margin. It is necessary to help you compare the company’s income with the cost of running the business. It also helps you forecast long-term growth.
Tip: To improve your company’s net profit margin, either lower the cost of sales and/or production or try increasing the revenue.
8. Employee Satisfaction
Employee satisfaction, sometimes called employee happiness, is a metric that helps you understand how satisfied or happy your employees are with their job. You can determine this metric with the help of different factors such as compensation, workload, satisfaction with management, work-life balance, etc.
Just as you used the NPS to measure your customer’s satisfaction rates, go for a similar survey to measure your employee’s happiness and satisfaction within your company.
9. Customer Lifetime Value
One of the key metrics you should incorporate in your business plan is Customer Lifetime Value (CLV). It denotes how much revenue you can expect to earn from a customer. Although CLV can vary from one sales model to another, a simple way to calculate it is by multiplying the average sale’s value by the typical customer’s retention time (in months) and the number of transactions they typically do in that time period.
The customer lifetime value is important because it helps you:
- Understand how to afford customer acquisition.
- Recognize customer segments that are too difficult to convert or turn profitable.
- Find out the issues that are decreasing customer retention rates.
10. Progress Towards Deadlines and Goals
Irrespective of the industry, a business has deadlines and goals which you can break down into milestones. Once you do so, you can track if the milestones are met or overdue. Why do this? So that you are better able to know your business’s capacity for production. You get to find out a couple of other problems as well, such as inadequate resources, unreasonable expectations, and low productivity.
11. Sales Revenue
Month-over-month sales results depict if your marketing efforts are paying off and whether
individuals are interested in purchasing your service/product. Sales revenue is one metric that can tell you a lot about the current state of your business. But how to calculate it?
Sales revenue is computed by summing up the income from client purchases, minus the cost linked with undeliverable or returned products.
To grow sales revenue, you need to boost the number of sales. You can do this by hiring new salespersons, offering discounts that people cannot resist, and expanding your marketing endeavors to new markets.
Listen Up: Increasing your sales revenue must be a long-term strategy to ensure consistent growth and progress. Try not to fall for some quick, rapid-results-promising business hacks to do this.
12. Cash Flow
Put simply, cash flow is defined as the amount of net money being transferred in and out of your business. Such a transfer happens through the services or products you sell, raising cash via loans and equity trades, and the companies you acquire.
This metric helps you know how well-equipped your business is to pay its employees and shareholders.
Own a small business? Learn how to manage cash flow in it.
13. Overhead Costs
Another essential metric to track for business growth is overhead costs.
The costs incurred by your business that are not associated with creating your services or products are called overhead costs.
These costs range from fixed, and variable, to a fixed-variable hybrid. Here’s what you should know about these three terms:
- Fixed overhead costs include payments like rent and insurance.
- Variable overhead costs include expenses like office supplies and utilities.
- Hybrid costs are where you pay a specific fixed amount, but they can either go up or down (for instance: salaries).
14. Training Cost per Employee
When new hires join your company, they go through a training phase. At this time, you pay someone to train them. Therefore, training cost per employee becomes one of the key business metrics to track. It is the cost you pay for onboarding and training your new employees. It is important to track this metric to know if you’re incurring some unreasonable expenses that don’t translate to overall business success.
Follow this formula to calculate a sum specific to your company:
Total Costs / Number of Employees = Per Employee Training Cost
15. Employee Engagement
As mentioned before, employee happiness is a metric that checks how happy your employees are in their jobs. Employee engagement, on the other hand, takes into account their happiness and multiple other factors. It helps you look at how passionately they work for your company and also takes their loyalty into consideration. It even looks at how willing they are to help grow your business.
Now, you may be thinking about the need to track employee engagement.
Remember, monitoring this metric helps you know how much effort your employees are willing to put in and how productive they will be. Engaged employees also generate good word of mouth for your business, promoting a healthy work culture that appreciates and rewards hard work.
Tracking key business performance metrics lets you identify potential problems and create effective solutions for them. Monitoring the right metrics can help steer your business towards attaining your goals.
In the end, we recommend judiciousness in the choice of business metrics you track. Don’t get overwhelmed with data and end up spending too much time collecting as well as analyzing. Instead, focus on using the right metrics to gain insights that help you effectively manage your business.
Now that you know what are the key metrics in business, you are one step ahead of your peers towards improving your company’s efficiency and growth.
Are you a startup? Learn about the important business metrics to grow your startup.
Sean Davis currently works as a content developer at DashClicks, a digital marketing platform that helps small and medium-sized agencies scale. He has been working in the digital marketing industry for several years. With that experience and expertise, he wants to help readers understand the technical aspects of digital marketing through his writings. Follow him on Twitter to read his work