Business Metrics, also dubbed as KPI (Key Performance Indicators) 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. Taking note of too much data can result in wasting an entrepreneur’s valuable time.
On the other hand, gathering the correct data can help you make smarter business decisions in the long run rather than depending on gut checks and mere luck.
6 Important Business Metrics that Many Small Business Owners Ignore
Having conversations with entrepreneurs and small business owners almost on a daily basis, I found that there are six business metrics that many of them ignore when they shouldn’t. Let’s take a quick look on each one:
#1: Cost of Acquisition (CoA)
Customer acquisition is the act of attracting customers to your product or service. Whether it’s advertising in a traditional way or using social media marketing strategies, 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 10 new customers in return, so the average 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 differently 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 this may sound like a hassle, it will be worth it!
By following the Cost of Acquisition (CoA) format, you can identify which marketing and sales strategy works best for you so you can gain more revenue.
#2: Expense by Category
Surprisingly, most business owners today only track the large expenses such as product design and legal. And although small expenses may not seem troublesome at first, they will gradually creep their way into your profit margins if they remain uncontrolled.
On this note, start tracking each small expense such as Zoom, Loom, Calendly, etc. Those monthly subscriptions can add up!
Aside from large expenses, practice tracking these small expenses as well and minimize them each month to avoid overspending.
#3: Monthly Recurring Revenue (MRR)
Calculated and reported at every quarter of the year, revenue or turnover, is income that companies receive from their 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, ask yourself if that revenue will still be here tomorrow and the days to come.
Although the cash flow remains to be the lifeline of any business, tracking MRR is crucial and a good first step to take in shifting to a more sustainable way of business.
If you’re a SaaS (Software as a Service) business, this is the metric that you must track without fail. You don’t need anything fancy to track this metric, an excel spreadsheet will suffice.
#4: 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.
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. Or, maybe it’s time to let them go.
#5: High Value Customers
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 good old ‘word of mouth’.
Customer retention is critical to the long-term success of a company.
You’re more likely to be successful in your business if you track and monitor your high-value clients. You can take measures to care for them so that they continue to provide you with regular income over time.
Give them a sense of exclusivity and prestige and in turn they will keep your business not only thriving, but growing. I recommend the book Never Lose a Customer Again to “Turn Any Sale into Lifelong Loyalty”
#6: Team Productivity
An employee that is underutilized is a liability to your company.
From your frontline staff through backend, it’s important to keep your staff productivity high most of the time.
It’s important to show your employees that you trust them, and no one works well when they’re micromanaged. But simply ‘having trust’ without productive results will not be enough to sustain your business.
As I teach in my Total Team Makeover, every person on the team must have a clear idea of your expectations of them as well as understand the mission of their role. To ensure that your team is productive, you must first make sure that they know your expectations and how their specific role contributes to the mission of the overall company.
When done effectively, weekly team meetings can help to make sure that everyone is hitting their own personal metrics as well as solve the issues that may be blocking them from reaching their potential.
Conclusion
Keep it simple. Track only the relevant KPIs to achieve efficiency and better results.
Be wary of small expenses, a small leak will sink a great ship.
Involve your team in knowing how their productivity affects the entire company. After all, it’s your people who are going to help you to realize your big vision.
Tell me, what did I forget? Drop in the comments if there’s something you’re tracking that I didn’t mention here.
Links to referenced sources that will take you out of Medium if you click on them are: DianePrince.co and my Total Team Makeover , and Never Lose a Customer Agai
Hi! I’m Diane Prince. I co-founded a company that we built from scratch to $50 million in six years and sold to a strategic buyer. I am a keynote speaker that talks and writes about building startups, founding businesses, and entrepreneurship. I share my perspective from my own experience from over 25 years building, scaling, and selling businesses.
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