8 Top Business Metrics to Track and How to Start Right Now
.png)
Your vision is to keep your business on a positive trajectory.
In order to do this, you know you need to be tracking metrics but it gets overwhelming with everything you could be looking at. So you would like a short list of actionable, meaningful metrics that are reasonable to get started tracking that will provide the widest range and most useful insights. Once you start tracking and making this public to your employees, you should expect more participation and excitement around reaching goals. The key here though is once you start tracking, meaning it has to be done month over month, no exceptions. This article is going to walk through eight related to tracking projects, customer costs, employee well-being, and profitability.
1. Projects completed on time
Why track this
You need to determine if your teams are working efficiently, and if the projects projected are within reason.
When: This could be monthly, quarterly, or annually but for most quarterly is enough time to be actionable and adaptable when you identify issues.
How you are going to do it
There are several methods out there to look at this but one way is the units-of-delivery method. This is going to compare the total number of projects finished to the total number of projects allocated for a period of time. The formula states ‘on time’ and that could be open to being done in the year for example, or you could get more detailed and do this monthly based on actual due dates.
Example: What is the project completed on-time rate for last year? There were 30 projects planned, and 20 were completed.
Project completed on time rate = 20 completed / 30 planned
Project completed on time rate = 66.67%
What do you do with this metric?
You can use this simple metric to review how productive your team was, but also how effective your project planning was. It’s time to do a post mortem and figure out what to adjust for next year.
Ask yourself:
- Did you put too much on the plate?
- Did they not do enough?
- Did other things come up during the year?
- Do you need more staff to reach your project completion?
2. Customer acquisition cost
Why track this
You have to know that you are not spending more on getting customers than the revenue coming in.
When: Annually
How you are going to do it
This link goes into further detail on the steps. You are dividing your marketing and ad spend by the number of new customers you acquired over the time period.
What do you do with this metric?
If your cost to acquire your customers is going up, you want to look at various ways to ensure the ad spend is directed at the right target, your touchpoints with them are guiding them to a sale, and that you’re following up with leads.
Ask yourself:
- Are our landing pages optimized to guide people through the journey? People may land on your site after seeing your ads but are they not purchasing?
- Do you have customer personas in place and if you do, have they been reviewed in the last year to ensure they are accurate?
- Do you have effective measures in place to follow leads that come in? Are you capturing contact information, and actually reaching out?
- Are you actively tracking where leads are coming from so you can confirm your spend in various areas is where it should be?
3. Customer lifetime value and churn
Why track this
You have to know how long customers stay with you on average so that you know if what you are spending on customer acquisition is in line with generating a profit.
When: Annually
How you are going to do it
This link goes into further detail about how to calculate each lifetime value and churn rate but the basic formulas are below.
The formula for churn rate
Churn = Customers lost / customers at the beginning of the month
The formula for lifetime value
Lifetime Value = Avg monthly recurring revenue per customer X customer lifespan
What do you do with this metric?
This will provide a baseline if it’s new to you to determine how long customers are likely to stay with you at this point in time. You can review your customer service, your product functionality, product offerings, interview some customers, etc. to determine where the areas are that make a customer leave to start correcting that. Over time, the goal would be to see the lifetime extended.
Ask yourself:
- Are we getting direct feedback from customers and making changes?
- Is it possible customers outgrow you and that’s why they leave?
- Are we communicating with customers after a purchase or are we missing something to keep them successfully returning?
4. Employee happiness and wellbeing
Why track this
Without employees, you will be out of business.
When: 6 months to annually
How you are going to do it
Using 360 performance reviews is one way, where employees have the opportunity to provide anonymous feedback to you via a set of questions. To make this easy, you could simply anonymously survey them. But what do you ask to get a full picture? How do you ask? You have to make it clear this is a psychologically safe space, and it’s recommended to score the questions with a 1 to 10 and give a space for writing. You don’t want yes or no answers as many questions are not black or white and that won’t be useful to act on. These are questions to start with and they are worded in a few different ways suggesting the 1 to 10 scoring as ideas:
- Where would you score a clear link between the work you do and the company goals?
- What would you score your opportunity for growth and advancement here?
- Where would you say your manager falls in motivating you?
- On a scale of 1 to 10, how comfortable are you in giving your manager feedback or sharing concerns?
- Describe our company to a friend in 20 words or less.
- On a scale of 1 to 10, where do you see this company supporting your work-life-family balance?
- On a scale of 1 to 10, how proud are you to be a member of your team?
- Where do you score your level of compensation and benefits?
- If you were to make a job change, what are the top 3 things you would be looking for?
- What tools do you feel are missing to be the best you can be at your job? You have to name at least one.
What do you do with this result?
Asking insightful questions provides you a way to see if employees feel valued, motivated, psychologically safe, included, stressed over family/work balance, and anything else that is of value that you can think of.
Ask yourself:
- If you get a lot of 5’s or less on any one question, when and what are you going to do to improve it?
- Are you actually ready to take the feedback? What if employees aren't happy with pay? About working in the office?
You cannot survey employees without being open to change, otherwise, you further drag down morale. You can't put the toothpaste back in the tube.
5. Margin and profit
Why track this
At any given time, you need to know you are generating a profit and you need to be monitoring this over time to ensure it’s on track.
When: Monthly
How you are going to do it
There is more detailed information on business percentages here. You want to be regularly looking at net profit margin and gross margin among others, but for the purpose of this article, we are looking at a starting point with the basics.
The formula for net profit margin
Net profit margin = monthly revenue - sales expenses X 100
Net profit margin shows you the company income after all expenses and costs.
The formula for gross margin
Gross margin = (overall sales revenue - cost of goods sold) / overall sales revenue
Gross margin shows you how much of a sales dollar goes toward profit and other costs.
What do you do with this metric?
You can improve net profit margin by looking into how to increase sales, or by figuring out how to lower the cost of production or sales.
Ask yourself:
- Is your product priced appropriately or are you due for increases?
- When is the last time you reviewed your vendor and sourcing costs?
- Are your shipping costs as efficient as they could be?
- Could you be cross-selling to your customer base?
6. Sales revenue
Why track this
You will know if your efforts are paying off if you are seeing increases in sales month over month.
When: Monthly
How you are going to do it
Revenue is an indicator that you are expanding, however, you want to ensure this isn’t the only metric you use and you look at the others above as your sales could be increasing but so could your cost to acquire customers.
What do you do with this metric?
This is a higher-level metric, that doesn’t quite guide you with exactly what to do like other metrics. It needs to be used with others for action but you can still ask questions, especially if sales are dipping. Ideally, you have a database you can pull total sales from each month.
Ask yourself:
- Is your sales team participating in regular training and do they have all the tools needed to close sales?
- Do they have effective ways to track leads and follow through?
- Is there something going on with supply issues that would lead you to fewer sales?
- Are you monitoring the competition as you should be so you can safely say it’s not another business with innovative product taking customers?
- Is everything up to par with website traffic, backlinks, and keywords? More on this one later.
7. Lead conversion
Why track this
This assists you in knowing if your product is worthy of all of the ad spend. If you are getting a ton of leads but low conversion, you need to know what is missing.
When: Monthly
How you are going to do it
This is a fairly simple math equation. Let’s say you got 1,000 new leads last month and you ended up with 200 new customers.
The formula for conversion rate
Conversion rate = number of new paying customers per month / total new leads per month
Conversion rate = 200 / 1000 = 20%
What do you do with this metric?
If you’re at a 10% lead conversion rate for example, you need to step back and think about what could be going on that 90% of leads see or try your product and bounce. This is a good time for customer interviews or soliciting interviews and feedback from those who left. You may need to incentivize it, but something is clearly not working.
Ask yourself:
- Do we offer a place for customer reviews and are we actually looking at them?
- Is our website nicely designed in a logical way?
- Is our product solving the problems of people using it in the most effective way?
- Again with competitors, what are your leads comparing you to out there?
8. Key marketing metrics
Why track this
If you find sales are down, you really need to know where your web traffic is at, the sources, the backlinks, and website domain authority.
When: Monthly
How you are going to do it
- Web traffic: Google Analytics. The link has detailed information.
- Web traffic sources: Google Analytics. The link has detailed information.
- Backlinks: There are a lot of options but Moz works really well.
- Website domain authority: Again there is a lot out there but Moz works really well.
For all of these metrics, you should be monitoring the percent change month over month. Let’s say your web traffic last month was 10,000 visitors and this month it’s 9,000.
The formula for percent change
Percentage increase = 100 X (increased value - original value) / original value
OR
Percentage decrease = 100 X (original value - decreased value) / original value
We have a decrease, so follow below.
Percent change = 100 X (10,000 - 9,000) / 10,000
Percent change = 10%
So, web traffic is down 10% this month. If you have all of these metrics in one place month over month, you can use visuals to view how you are trending in a spreadsheet so that you can start to notice right away where there are issues to improve.
What do you do with this metric?
If web traffic is down, you need to know why as this is likely assisting in sales being down. You can look at the web traffic sources month over month, the number of backlinks acquired monthly, as well as how your website domain authority is trending.
Ask yourself:
- Have you been keeping up on keyword research and ranking? Where do you fall compared to competitors? Should you be ranking for something you aren’t? Have rankings fallen?
- Is there a change in web traffic source? Are people moving to app searches and you aren’t at the top?
- Were you getting more backlinks six months ago and that has started to trend down? Why might that be?
In summary, there are an absolute ton of business metrics out there you could be looking at but that is overwhelming if you’re a small business. You may or may not have the people to do that, and you need to get started somewhere. The biggest hurdle is simply establishing the what and how. Once that’s done, you have the plan, it’s fairly quick each month to get numbers.
These topics cover the basics and you can develop further from here after getting these actually in a spreadsheet, that is published and being actively looked at. This is an abbreviated list and many of these give insights into other areas. For example, if customer lifetime value is up, that is a primary metric whereas customer satisfaction would be the next step, but customer lifetime and conversion rate are great indicators from a higher level.
Written by Nicole Hullihen, January 22nd, 2022