In order to run a successful enterprise, you need to know where you stand. In today’s increasingly competitive and multi-faceted business economy, evaluating performance might not be quite as straightforward as you think. Your bottom line is one thing, but what about turning an analytic eye to how workflow and sales strategies are shaping financial results?
The smart use of business performance metrics will allow you to do just that. Also referred to as key performance indicators (KPIs), these business performance metrics allow you to visualize a measurable value that demonstrates the progress of a company’s goals. There are many different business performance metrics out there, some of which are more appropriate than others depending on your goals.
Here is an overview of the seven most important business performance metrics:
1. Business growth metrics
These business performance metrics allow you to chart the pace at which your overall sales revenue is increasing or decreasing over a given period of time. In order to track it, you simply need to check your monthly sales revenue and the number of new deals.
If your sales team work in multiple teams, you can also track this business metric on a team by team basis. This will give you a more comprehensive overview of each sales department’s achievements.
2. Labour costing metrics
The labour costing metric is an important indicator of how well your business is performing. In the event that this number is really high, it could be due to the unproductive use of time by your workforce or the high expenses in your processes. This means you have excesses in the way your business is structured.
If labour costs continue to rise, you have a serious problem especially if these expenses eat into your profits. In order to control this metric, take a close inspection of your labour and your processes to improve any inefficiencies.
3. Sales revenue metrics
Sales revenue is one of the common business performance metrics that you’re undoubtedly already familiar with. Depending on the timeframe within which you evaluate your revenue, you can determine how interested consumers are, whether your marketing efforts are having the effect you want, and what kind of toll the competition is having on your sales.
Implicit in this is an awareness that sales revenue is affected by multiple factors and has the most to tell you when considered from a nuanced perspective. Keep in mind that a goal to improve sales revenue should always be considered as part of an overall long-term strategy, rather than a quick fix.
4. Net profit margin metrics
Slightly more complicated than sales revenue, net profit margin is another important business performance metric. These metrics give you an indication as to how efficient your company is at producing profit vis à vis its revenue. Here, you’re essentially calculating how much of each dollar earned is actually translating into profit.
An important part of any long-term growth strategy, these business performance metrics will allow you to determine if the cost of running your business is sustainable. In order to arrive at your net profit margin, you simply calculate monthly revenue and subtract all the sales expenses.
5. Gross margin metrics
Gross margin tells you how much your company earns by each sales dollar. As these business performance metrics grow higher, you’ll see that you’re able to invest your earnings in other operations. When starting out especially, these business performance metrics will tell you how your process and production are running and whether or not adjustments you’ve made are paying off.
You can basically think of it as a numerical depiction of your company’s productivity. This number is obtained by taking your company’s total sales revenue minus its cost of goods sold, divided by the total sales revenue.
6. Customer acquisition metrics
The CAC, or cost of customer acquisition is an important business performance metric to consider as part of your overall growth strategy. Calculated by diving all the costs, or marketing expenses, spent on acquiring new customers, this number tells you a lot about whether or not your current promotional tactics have you on the right track.
It is important to note that the CAC should be considered alongside the customer lifetime value. Lifetime value of various client segments will tell you which target audience brings in more profit over time. You’ll then be in a better condition to focus your energy on the most rewarding group.
7. Monthly website traffic metrics
Another business performance metric you’ll be wanting to keep a steady eye on is your website’s monthly traffic. This will tell you a lot about your current reputation and how people are responding to your product selection. You can easily track this using a free marketing tool such as Google Analytics, which will also reveal how people typically find your site.
