7 Key Business Metrics: How KPI Metrics Help a Company

Business metrics are benchmarks indicating how well your company performs on various scales, from marketing to sales and beyond. Having a working knowledge of these various measurements is a cornerstone of holistic business intelligence. Tracking business metrics gives you data you can use to improve your project management and business processes, direct marketing efforts, assess your company’s financial performance, and increase your sales. These quantifiable metrics help you set goals and achieve them.

Business metrics enable you to track your company’s performance in real time. Here are four general types of such benchmarks:

1. 1. Financial metrics: Things like cash flow, cost of goods, and liquidity provide the backdrop to many important business decisions. You need to accurately assess your current financial situation and forecast where it will be in the future. Financial business metrics can help you do this.
2. 2. Marketing metrics: Your business strategy likely includes digital marketing efforts. Marketing metrics allow you to track things like your conversion rate (how often people click on or purchase things online from you) or the sort of traffic your ads generate in general. Keeping an eye on these measurements helps you calibrate when a marketing campaign is working and when it needs improvement.
3. 3. Performance metrics: Companies need to gauge how they’re performing internally. Business performance metrics accomplish this in myriad ways: They can provide data about employee satisfaction to human resources departments, track the efficiency of business operations, or assess whether automation might be necessary.
4. 4. Sales metrics: Companies need to determine how well they’re meeting their business goals in total sales revenue. Sales metrics enable you to track the total number of new products you’ve sold and your overall sales growth rate. They can also help you better understand how customer satisfaction (or the lack thereof) affects your customer retention rate. For example, if a SaaS company (or a “software as a service” company) sales team notices a drop in subscriptions, the sales staff can comb through data with the marketing team to learn why this might have happened.

There are numerous business metrics that can help you better understand your own company’s performance on multiple levels. Here are seven important metrics you can track for your own business:

1. 1. Customer acquisition cost (CAC): Businesses want to bring in new customers, and it’s useful to know the exact cost of customer acquisition. Customer acquisition cost helps you determine how much money in advertising it takes to bring in the average customer for your business.
2. 2. Customer churn rate: While every company strives to have a solid, growing customer base, even the most successful will lose clients and customers over a given period of time. The customer churn rate indicates the percentage of people who cancel subscriptions or stop doing business with a company. Businesses that track this metric can correlate this information with other important data points.
3. 3. Customer lifetime value (CLV): In addition to displaying your total number of customers, metrics enable you to track more overarching concepts, such as customer loyalty and lifetime value. CLV refers to how much value a customer brings to your company from their first purchase to their last.
4. 4. Gross margin size: This important business metric subtracts the costs of goods and services from sales revenue, then divides the figure by that revenue to reveal your profit margins. Keep in mind gross margin is different from net profit margin. To find net profit margin, divide your company’s net income (the amount of money left over after taxes, expenses, and interest) by its revenue, then multiply the figure by one hundred.
5. 5. Monthly recurring revenue (MRR): This key metric enables you to predict your company’s financial performance from one month to the next. It assesses how much money is likely to pour in on a recurring basis.
6. 6. Net promoter score (NPS): You can do a survey online to determine this important metric. Ask people to rank how likely they would be—on a scale of one to ten—to recommend your product or service to another person. Once they do, take the average of all these responses to find your net promoter score.
7. 7. Website traffic to lead ratio: In the digital age, companies often use their marketing channels to create website traffic. This business metric takes account of how often web traffic produces qualified leads (people who came to your site and came close to purchasing or actually did purchase one of your products or services).

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