Metrics of Business Performance That Every Company Should Understand

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    Consistent reporting and evaluating business metrics are vital for a company’s success. In the metrics, some essential information includes total revenue, net profit, profit margin, and loss. These are the financial metrics that usually reflect the business’ growth.

    But to see deeper analytics of the company’s performance, regardless of the size and aims, there are critical business performance metrics to consider adding to the data arsenal. It has three categories, financials, marketing outcomes, and team member performance. Learn here more about metrics that can help understand business performance. 

    How to Measure Company’s Performance?

    Measuring a company’s performance is run by a thorough analysis of the work, sales, and financial results. And to make it possible is to track using relevant business metrics. 

    Business metrics are also known as KPIs, meaning key performance indicators that allow measuring the company’s progress toward its goals. The metrics usually show the tracked information through a KPI dashboard, highlighting the progress and goals achieved for a specific time frame.

    There are a lot of key performance indicators; however, there is no need to use all of them. As tracking irrelevant KPIs can distract the fundamental business matter and stress the management with unrelated numbers, the company must know its goals and use suitable business metrics for particular objectives.

    As said above, there are wide variations of business metrics. So, here are the top 12 most popular KPI trackers used by business companies. 

    #1 Sales Revenue

    It is the most used business metric by different companies as it shows the month-over-month sales results. It reflects the essential growth in people’s interest in the product/service. Also, it presents the impact of the marketing strategy and the company standing within the market competition. The assessment of sales revenue must show the progress of aiming the goal and consider different factors that may affect it. 

    Using sales for KPI, the management must be aware of market changes, past marketing tactics, competitive actions, and more. The calculation of sales revenues comes from adding all the income from confirmed purchases minus the cost of the returned product or refunded service.

    #2 Net Profit Margin

    The net profit margin is the business metric that shows the company’s capability to generate profit compared to its revenue. It shows how efficient a company is as it helps predict long-term growth in the business industry. Also, it presents information on whether the company’s income can exceed the business’s costs. Measuring the net profit margin is about calculating the monthly revenue and then reducing the operational costs. 

    #3 Gross Margin

    The gross margin is a metric where companies can reflect on their improvement in terms of process and production. The measurement comes from the company’s total sales revenue reduced by the sale of the product costs, divided by the total sales revenue. Hence, it is the numerical representation of the company’s productivity

    #4 Year-To-Date Sales Growth 

    It indicates the company’s sales revenue pacing in a particular period. It shows the progress of sales growth at various times, like monthly and annually. The seasons are one factor that can affect this business metric as it will reflect the company’s stands at a particular period. This KPI gives awareness to the company on their respective progress per a specific period. Hence, it helps enhance their strategy of maintaining commendable growth. 

    #5 Cost of Customer Acquisition

    Another metric of business performance is through calculating the cost of customer acquisition. It measures how much a company spends to gain new customers. Get customer acquisition costs by dividing the total expenses for obtaining new clients, like marketing expenses, by the volume of new customers acquired in a particular period. 

    #6 Customer Loyalty and Retention

    Loyal customers help the business to grow and improve. And to be aware of their standings, customer loyalty, and retention metric allows the company to see the growth and reach of the service/product. The retention rate is the number of customers who keep using the service/product over an extended period and purchase again. Strengthening customer loyalty is constantly providing improved customer service and bringing high-quality service/products. 

    #7 Net Promoter Score

    The net promoter scorer is a KPI that shows the product quality and the level of customer satisfaction. The data focuses on how recommendable the product/service is to others. Following Net Promoter Network, there are three levels of customer advocacy. 

    The promoters are loyal customers of the product/service and will surely recommend it to others. The passives are satisfied but can change products/services if they find a better one. And the detractors, who are the disappointed customers and will leave negative feedback that can affect the company’s image. 

    #8 Qualified Leads per Month

    Coming up with new leads each month is a thing for any growing company that can lead to hundreds of new leads per month. However, not all of these leads have the probability of converting into a customer. This metric is more about identifying the number of qualified leads per month. 

    Qualified leads per month can showcase whether the management is aiming at the right market with the highest potential of attracting new clients. It is essential to be aware if the number of qualified leads is alleviating or declining, as it can be a basis for decision-making with the market and sales strategy. There are three distinct groups under this metric – the Marketing Qualified Leads (MQL), Sales-accepted Leads (SAL), and Sales Qualified Leads (SQL).

    #9 Lead-To-Client Conversion Rate

    The Lead-To-Client Conversion Rate is a business metric representing the sales team’s performance. Getting the result measurement of this is by dividing the number of monthly new leads by the number of monthly new clients. In addition, this business metric may highlight the quality of the product/service. It reflects that if qualified leads fail to convert clients, target customers might be unimpressed with the offer. 

    #10 Website Traffic

    Another preferred KPI for companies is using monthly website traffic. It is the best indicator of a company’s reputation on the internet. It reflects how much engagement and reaches the product/service had. This data is possible with the help of excellent marketing tools like Google Analytics. It tracks the monthly website traffic and the traffic sources to help understand how people find the website. 

    #11 Meet and Overdue Milestones

    As most business companies have goals and milestones, aiming for double subsequent quarter sales or planning to launch a new product/service indicates business growth. These big goals are projects that can split into milestones, marking progress. Hence, management needs to regularly check the number of met and overdue milestones. It reflects the capacity of the company to reach these specific goals. Also, this indicator tracks whether the company can meet the target period of accomplishment.

    #12 Employee Satisfaction

    A company’s success always starts with productive employees. And to be able to do that, the company must always ensure that their employees are still satisfied with their work to function effectively. Ensuring high-level satisfaction is a long-term commitment to the management and company. Do regular team member satisfaction survey is an excellent way to reflect if it meets the goal. Hence, it secures work productivity that can help in better results. 

    Takeaway

    As there are many choices of business metrics, keep in mind that it is essential to know the target data needed. That way, the company can utilize the right metric to help understand the business’s growth. These key performance indicators are here to aid and guide business companies toward reaching their goals.