Business Metrics, also dubbed as KPI (Key Performance Indicators) by analytics, is the cluster of important business data that will help grow your business through well-informed decisions.
The number of KPIs that can be tracked vary widely depending on the type of your business and taking note of too much data would only deem business owners a waste of their time.
On the other hand, gathering the correct data could help attain smarter and wholesome business decisions in the long run rather than depending on individual efforts and mere luck.
Below are important business metrics tracked by some of the world’s top businesses that small businesses need to take note of:
Cost of Acquisition (CoA)
Customer Acquisition Cost (CAC) is one of your most important business metrics. Customer acquisition is the act of attracting customers to your product or service. Whether it’s advertising in a traditional way or taking advantage of modern digital marketing strategies like a digital billboard advertising, neither cost is decreasing and investing wrongly can be a severe blow to your profit margins.
To calculate the cost of customer acquisition, use the formula below:
Cost of Customer Acquisition = Total Sales & Marketing Cost / Number of New Customers Added
For example, you spent a total of $ 30, 000 on advertising, marketing and sales and got 8 new customers in return, the total CoA would be $ 3, 000. However, hidden costs such bills and other expenses such as salary that contributes to a sale should all be considered.
Every customer pays different too. That’s why using the term ‘average’ should be fair. When implementing multiple campaigns, it’s important to track customers based on each campaign to avoid significant losses. Although a hassle, it will all be worthy in the end.
By following the Cost of Acquisition (CoA) format, this will allow you to identify which marketing strategy works best for you and will allow you to gain more revenue.
Expense by Category
Surprisingly, most of the large business owners today only tracks the large expenses such as raw materials and appliances. And although small expenses may not seem troublesome at first, it will gradually creep its way into your profit margins if it remains uncontrolled.
On this note, start tracking each and every small expense such as the different types of bills and other types of expenses. Aside from large expenses, practice tracking these small expenses as well and minimize them each month to avoid overspending.
Read about Startup Sales Strategy.
Highest and Lowest Selling Product/Service
In each business, there is always that one particular product or service that stands out the most. While they account for most of the total MMR, it’s easy for business owners to ignore the underperforming product or service instead of improving them instead.
Tracking the sales of each product or service is the first step in improving the overall quality. Asking for customer feedback is the second step. Through customer feedback, business owners can identify how those underperforming products and services can be improved to meet customer satisfaction.
This can easily be done and automated through good accounting software like Quickbooks that can also provide access to reports that generate important data about company sales.
In most businesses, high-value customers are those who remain loyal and consistently support your business. They are the champions of your products and services that attract new customers through the good old ‘word of mouth’. The future of your business will survive depending on these customers.
Through accounting software, keeping track or creating a system for your high-value customers such as providing feedback, discounts and referral benefits will give them a sense of exclusivity and prestige and in turn will keep your business not only thriving but growing.
Monthly Recurring Revenue (MRR)
Calculated and reported at every quarter of the year, revenue or turnover, is income that companies receive from its business activities usually from sales of goods and services to customers.
The amount of revenue that a company expects to receive every month is called MRR (Monthly Recurring Revenue). Instead of focusing on gains and losses, try to realize whether that revenue would still be here tomorrow and in the days to come.
Although the cash flow remains to be the lifeline of any business, tracking MRR is one of your crucial business metrics and a good first step to take is shifting to a more sustainable way of business.
Digitizing your business by Investing in SaaS (Software as a Service) is an excellent way to track with minimum errors but a rather simple utilization of the excel sheet would suffice.
From your frontline staff through the backend, it’s important to keep your staff productivity high at all times. Like underperforming products or services, an underperforming staff is also a liability to any business. By simply ‘having trust’ and other external factors without productive results, will not be enough to sustain your business. Always utilize every working member of your staff.
A task management tool can easily be used to successfully assign roles and responsibilities. A more modern project management software can also be tailored depending on the type of industry that you belong. Each staff member should also keep their duties and goals in mind along with a completion timeline.
A supervisor should only supervise business-related matters and a manager should only manage business-related concerns. Learn to also build a proper business protocol for any dilemma to save time.
Most software companies can track time spent on any developments. Doing the same will allow you to track your team’s individual performance and discover opportunities to produce more efficient results.