Are you tracking business metrics for your company? If not, why not?
Having quantifiable measures to track different processes in your business can be hugely beneficial to judge the performance of different areas of your business, and help you improve profitability and performance. By setting metric-based goals, you have the ability to gauge whether or not your strategy is successful and make data-driven decisions to identify areas where the company is meeting (or falling short) of expectations. It’s a no-brainer!
It will help you to:
- Assess business performance
- Identify problems before they become a major pain-point
- Compare performance against industry benchmarks
- Make sure your business is working toward shared goals
- Set future business goals
- Ensure compliance with governmental and regulatory agencies
- Provide stakeholders with insights needed for decision-making and communication
However, with today’s advancing technology, the challenge can be that there are SO MANY business metrics that your company can track; it can be difficult to know which ones are the most important.
At the very least, businesses should track their performance in sales, marketing, finance, and human resources in order to see where they stand and how they may improve in the future.
These four questions can help you identify metrics that may be the most important to your business:
- Is the metric directly relevant to business performance?
- Does it help predict future performance in a useful way?
- Can it be reasonably measured?
- Is the team associated with the metric authorized to make decisions to impact it?
So which metrics should your business be focusing on? Let’s look at a few right now.
Sales Metrics
1. Net Sales Revenue
We know revenue is the lifeblood that keeps any company afloat. Depending on the size of your business, you could look at annual recurring revenue, average revenue generated per user or customer, revenue by product or product line, revenue by territory or market, and revenue generated per person.
Make sure you are also aware of recent changes in the market, previous marketing campaigns, competitive actions, etc., that may be affecting your sales revenue, as well.
2. Churn Rate
Sometimes referred to as attrition, this is the percentage of customers who cancel or don’t renew contracts or subscriptions for a company’s services or products. If you rely on repeat customers, this is a key metric to watch, as it is also a sign that customers aren’t engaged or satisfied.
This is also a great metric that can cross department lines. For example, in sales, it reflects a business’ ability to retain customers, but in finance, it’s a great metric to watch to see potential impact on a company’s upcoming sales and profits. For software-as-a-service (SaaS) businesses, it can show rising or declining subscribers, which will affect revenue. All of which will also hit the marketing department, which may need to evaluate channels and campaigns that performed well or fell flat. It can also show where a company is losing sales to competitors.
3. Growth Rate
An important overall indicator of the health of your business is looking at the year-over-year growth you are achieving. You can compare it to industry standards and know how well or how poorly your sales team is performing compared to the competition. It’s also a good idea to track this metric by every team in your business, which will give you a better overview of each department’s achievements.
Sometimes sales are dependent on the season and market conditions, so it’s also necessary to keep these things in mind when looking at your growth rate.
Marketing Metrics
1. Customer Acquisition Cost
How much is your business spending to turn a prospect into a customer? This should take all marketing and sales costs into account, from salaries and benefits of the staff to media spend. This is an important metric to consider so you can measure your investment and make the right decisions for future growth. If your customer acquisition costs are higher than your revenue, you’ll likely go out of business.
2. Customer Lifetime Value
This is how much revenue a customer generates during their entire relationship with your business. Cross-selling and upselling current customers are the most cost-effective ways to sell your products and this metric will give you inspiration to continually upgrade your customer relationship.
You will also want to see at what point the cost of acquiring new customers is overshadowing the revenue they generate. How long will it take you to recoup the investment in acquiring a new customer? Evaluate the financial worth of each customer and see how much business you can reasonably expect to earn over the lifetime of their relationship with your company. This metric will also help you identify segments of your customer base who are the most valuable.
3. Conversion Rate
This is a way to measure the percentage of users or customer prospects who complete a desired outcome, such as making a purchase, registering an account, signing up for a newsletter or starting a free trial. It is up to your business methods on what you may be looking to track. This can help you get a feel for how well your marketing efforts are paying off.
If it happens to be down against internal or industry benchmarks, it’s a good time to look into what is turning people off. It could be design, functionality, or the offer.
Next month, we’ll look at a few other key areas to track. But, in the meantime…
CREATE YOUR OWN CUSTOM DATA DASHBOARD
When it comes to tracking metrics, KBS can help! We are launching a brand new service – the Knecht Kashboard – which allows you to build a custom dashboard of all the business metrics your heart desires. It will give you an at-a-glance snapshot of all the key areas of your business. It’s an easy tool to set up and, with one click, you’ll be taken to a single Web page that shows you the highlights of things like your financials (via QuickBooks Online), your social media accounts, your Website traffic, and more!
Click here to learn more, or contact us, today and let us help you get set up to see the important metrics in your business!