Business takes a lot, not just money, not just strategies but a lot more than that. Hence you always have to plan one step ahead and follow a few metrics in order to grow your business. Business metrics not only ensure good revenue but also helps adhere to a good relationship within the organization.
So let’s understand first what are business metrics. Business Metrics are nothing but quantitative measures to track your business performance by different entities. Metrics can also be known as Key performance indicators. There can be thousands of metrics to track your performance but it depends completely on individuals, which ones are important for their businesses.
Now let’s dive in and understand X's most important business metrics to give you a kickstart in your business success:
Perhaps the most important business metric is sales revenue, as this is the deciding factor of other business metrics as well. Sales Revenue gives you the insights to measure whether your marketing strategies were up to the mark or unsuccessful. You can calculate the sales revenue by adding the income from your overall sales and subtracting any costs of not delivered or returned products.
Sales Revenue = Overall Sales - Undeliverables or Returned Products
Or simply it can also be calculated as Sales multiplied by the Average Sales Price per product, which gives you the revenue.
The most obvious way to increase sales revenue is to grow your sales with smart and intuitive marketing strategies in order to get good revenue.
Net profit plays a very important role in any business. The net profit of the company ensures how much profit you have generated compared to the revenue. It’s a good parameter to forecast your business growth and understand other perspectives as well.
The simple way to calculate the Net Profit is to subtract the sales expenses from the sales revenue.
Net Profit = Total Revenue - All Expenses
Net Profit has a correlation with Total Revenue, as it directly depends upon sales.
This metric helps you to decide how many of your leads are converted to your potential customers, to purchase your products or services. Leads are converted by a few marketing and strategies factors, but a few potential factors are:
Lead conversion can be of various types, it may be:
When you found a new product in the market which was completely new to you, you probably Googled it. Yes, that’s right!
In this digital era, no one believes your business, until or unless they go through your website and create a trustworthy relationship. And that’s a common mindset of people these days, as we are living in a world where digital presence is very important.
And hence, this becomes a very important metric for any business, no matter the domain. The most important KPIs to keep the track of when it comes to Website Traffic is:
When it is about spending the particulars for your company, the customer's acquisition cost plays a very important role. Because it's foremost to keep track of the cost you spent on marketing creatives and other advertisements to get your leads and convert them into customers.
CAC(Customer Acquisition Cost) can be calculated as:
CAC = Total Marketing Cost / Acquired Customers
When you are investing on your CAC, it's always important to keep a few pointers in your mind:
Leads are not always the customers and they are never converted just by themselves. As it takes a lot of effort, to find potential leads to turn into customers and clients.
The lead-to-client conversion primarily depends on the sales team and secondarily on the Marketing team. How?
To measure the rate of Lead to Client Conversion:
Lead to Client Conversion Rate = The number of Monthly Leads / Monthly Customers
This is probably not an accurately measurable metric, but it’s a very significant metric to keep all other KPIs satisfied for your business. A healthy mindset and relationship is the key to a balanced work culture and environment. As it is very important to minimize conflicts, work happily, and maintain a balanced work environment in order to grow the business. But it doesn’t necessarily depend on the employees, but also the kind of treatment they are getting at their workplace.
Employee happiness is pretty much a mixture of good behavior, good relationships within, satisfying work hours, bearable work pressure, and good commercials ratio to work.
When all these parameters are balanced enough, the company maintains a healthy work environment, which is employee-centric and employees remain happy and satisfied, as it gives them the confidence to be listened to.
Having loyal customers indicates that your business and strategies are going in the right direction. It also helps to grow your sales gradually. The Retention Rate metric tells you how many clients or customers are using your services or products in a recurring manner over a period of time.
But how can we measure the Retention Rate:
RR = ((E-N)/S)*100
RR is the retention rate
E is customers at the end
N is a new customer
S, customers in the start
These are calculated for a specific time being, for example, if we have 100 customers at the end of the month, the new customers are 20 and you lost 10 customers:
Number of End Customers: 100+20-10 = 110
Number of Customers at the start: 100
RR = ((110-20)/100)*100
RR = 90%
Generally, the target for Retention Rate is to hit more than 85%, which is considered successful customer retention.
Although the list of metrics to follow in Business doesn’t get over here, but, we hope it was useful to consider for your business. Regardless of these business metrics, Communication, Compliance, Return on Marketing Investment, and Customer lifecycle value are some other important metrics that can be considered as well.
A successful business runs on strategies and these crucial KPIs, but it’s also important to keep the pace slow and steady and not run too fast just to maintain the race with your competitors. As it might show good results in the short run, but it’s not good in the long run.