Good data supports good decision-making and good decisions lead to success in your endeavors. Trusting your gut and following intuition have their place but when evaluating the efficacy of business strategy, as you work to drive results in the near and long term, it’s imperative that you listen to the story the data tells. Why waste time and money on guess work?

The biggest question is, which metrics should you follow? Dozens of data points can be generated and examined, but which metrics will adequately address your questions and guide you? The ability to select KPI (Key Performance Indicator) metrics that reveal your company’s performance against objectives you’ve determined are relevant is the most critical factor of analysis. Tracking only the most important KPIs is meant to narrow your focus to those metrics that impact the objectives you want to achieve.

Your company business model and the industry in which you operate will largely determine the KPIs that make sense for you to monitor. As usual, you’ll need to give the matter some thought. Ask yourself—what company goals should you pursue? Have you identified major areas in need of improvement? What are the top priorities? Answering those questions will bring you a step closer to identifying the right KPIs for your organization. Choose metrics that help you further understand and achieve company goals.

Below are a sampling of KPIs that give potentially useful insights into any business. Maybe you’ll find two or three that you’d like to include in your monthly review of business operations?

Overall company performance KPI metrics

Gross revenue (top line)

• Total income generated from the sale of company goods and services. This value matters because it tells the unvarnished truth of what the company is selling. Gross revenue reporting excludes the cost of goods sold and includes only the money earned from sales. On the Income (Profit and Loss) Statement it is the first entry, the top line.

Net income (Bottom line)

• Net income indicates a company’s profit after all of its expenses have been deducted from revenues. Net income is the uber metric for profitability and provides insight into how well all aspects of the business. Net income is often referred to as the “bottom line” due to its positioning at the bottom of the income statement.

Number of clients

• The number of active (within the last three years) clients on your roster.

Lead conversion rate

• This helpful metric points to the power of your leadgen marketing strategy and tactics, including your website landing page. For example, if your Call-to-Action invites visitors to register for a webinar or complete an online survey, learning the percentage of visitors who respond to the CTA, that is, those who were converted from a mere website browser to an actual lead by taking an action that signals engagement, is highly instructive.

Financial KPI metrics

Gross revenue

• The sum total of the sales of all products and services, within a given period (day, week, month, quarter, year)

Net Income

• After all fixed (operating) and variable (selling) expenses have been deducted, inventory has been added (if applicable) and interest, taxes, depreciation and amortization have been calculated and deducted, the net profit (income) or loss is revealed in the bottom line of the Income Statement.

Cash-flow

• Operating cash-flow is the amount of cash generated by a company’s normal business operations and it indicates whether a company can generate sufficient positive money to stay in business. If making upgrades of some sort, scale or grow are a goal, operating cash-flow reveals whether borrowed financing will be needed. This figure confirms whether or not accounts receivable are paid to service providers.

Cost of Goods Sold

• The sum total of all costs used to create a product or service that your company sells. This number is often a challenge for service providers to calculate. We sometimes forget that our time has a price tag attached. How many hours were devoted to revamping a client’s social media campaign? How many hours did you spend creating Power Point slides for a workshop that you’ll teach? This figure should be accurately reflected in the prices you charge. Along with being aware of the time spent on providing a service, there is also the matter of the wholesale value of your hourly rate. Basically, it is wise to consider the value your client will derive from the work you do, in addition to the hourly rate for your labor.

Client KPI

Client churn rate

• The opposite of retaining clients is losing them through the process known as churn. It’s a disturbing metric but one that every business owner must confront and diminish. For many B2B service providers, as well as other business owners, a client will do business with an organization only once and it is not a negative judgment against the business. Some projects are one-off by nature. Still, it’s important to understand why certain clients are not returning. What can you do better? Along with your final project invoice, a brief client survey could yield valuable and actionable follow-up information.

Number of clients

• How many active (within the past three years) names are on your list? Also, how many give you repeat business and how well known are they?

Client acquisition cost

•  Assess the cost effectiveness of your marketing campaigns when you calculate the total sales and marketing cost needed to land a new client. Divide your marketing and other client courting activities contained in total acquisition costs by the number of new customers, in the time frame you’re examining.

Client retention rate

•  The number, or percentage, of clients who return to do business with you. This is an indication of client satisfaction and a great compliment to you and your team.

Marketing KPI

Website traffic

• Measuring the number of people who visit your website is one of the more basic KPI metrics, but it’s still important. Your website is home base home to everything that’s needed to inform, convert and close a sale with your buyer. If your marketing campaign isn’t getting people to visit your website, then you must rev up your marketing strategy and execution. Hubspot, Google Analytics and a few other can report the total traffic numbers, tell you how many new visitors are browsing and also show you where those visitors are coming from. If you operate marketing campaigns on different social media platforms, you can learn which ones send the most traffic to your website and which ones are failing to stir up any interest.

Marketing ROI

• Return on Investment metric reveals if the money spent on marketing activities is generating the desired sales revenue. Keeping track of your marketing ROI will make it easier for you to justify marketing budgets, calculate marketing efficiency and ultimately help you plan future marketing strategies. 

Referral traffic

• Discover where website visitors are coming from, how potential prospects find your company. Learn which social media platforms bring in the most and the highest-quality leads. Does voice search show potential and should you invest time in long-tail phrases to grow this segment? Does your newsletter bring leads? This could be useful information when building your overall marketing strategy.

Thanks for reading,

Kim

Image: © Nick Bassett (2014)