When companies need to measure the progress of a campaign or see how they stand in relation to their competition (or an older version of themselves), they turn to key business metrics. These business metrics, sometimes also referred to as key performance indicators or KPI, are quantifiable data points that can be used in a wide variety of ways.
Here are 10 examples of the most commonly used key business metrics and why they’re important:
- Total Revenue
One of the easiest business metrics to capture and understand, total revenue is the amount a business generates from the sale of its foods or services. This number may also include stock liquidation or any other type of income that winds of on the balance sheet, even if it’s not the direct result of a sale.
- Customer Acquisition Cost
Customer acquisition cost (CAC) is how much a company spends to bring a new consumer on board. That number may include money spent on marketing initiatives designed as well as other fixed and variable costs.
- Customer Retention
Since it costs more to acquire customers than to retain them, it’s crucial to know how well your company is doing in terms of not only keeping customers but also how much revenue your existing customer base is generating.
- Operating Productivity
There are many different productivity KPIs to choose from. Some, like overtime hours, look at how much an individual employee is getting done. Others, like overall labor effectiveness, involve several moving parts and evaluate the team as a whole.
- Gross Profit Margin
Gross profit is a metric that measures how much of your revenue is profit after you subtract cost of goods sold (COGS). This is usually represented in the form of a percentage.
- Monthly Profit & Lost
As a company, it’s understood that you want to be profitable overall, but tracking monthly profit and loss also helps you understand whether that profitability is consistent or if there are troublesome patterns that need to be addressed.
- Fixed Costs
Fixed costs are expenses that don’t change. Things like the amount of rent you pay and your insurance premium stay the same no matter how many trucks you sell or marketing consultations you book.
- Variable Costs
Just as the name suggests, variable costs change from month to month depending on factors like how many customers you get and how many products you sell. Examples of variable costs include labor, packaging, and the cost of raw materials like lumber if you build treehouses or eggs if you have a bakery.
- Inventory Turnover
If you deal in tangible goods, knowing how often your inventory is sold and then replenished will indicate how efficient you are. Knowing this metric for individual products can help you identify loss leaders and money makers.
- Cost of Goods Sold (COGS)
COGS is what it costs you to make whatever it is you’re selling. This number should include not only raw materials but also the labor that goes into the production process.
