How to Choose The Key Business Metrics to Monitor
About 20% of small businesses fail within the first year. By the end of the fifth year, about 50% have failed.
After a decade, only 30% of businesses will remain.
Tracking your key performance indicators (KPIs) will help ensure your business is on track. If you’re failing to meet your KPIs, you’ll know it’s time to make a change. You can make more informed decisions for your business moving forward.
Not sure which business metrics to track? Here are four types of metrics to keep in mind. By tracking these metrics, you can improve your business efficiency.
Set your business up for growth and success by tracking these key metrics today.
1. Financial Metrics
Tracking your key performance indicators will help you achieve company-wide objectives. Business metrics, on the other hand, are defined activities within your business. One of the most important metrics you’ll need to track involves your financials.
For example, you can track profitability ratios to measure the company’s growth and profitability.
The financial leverage ratio indicates how debt is impacting your financial success. You can translate this ratio into an assessment of potential risk.
Otherwise, consider your liquidity ratio.
This ratio helps management and potential buyers. You can determine the company’s ability to pay off current debt obligations.
You can use business software to keep track of your current financial statement data, including:
- Gross margins
- Net income
These metrics will help you determine the company’s operational efficiency. You can use the tools at https://www.tekmetric.com/ to get started.
Both management and company executives can gather these insights before making corporate decisions. Companies can use this information for direction regarding their:
- Sales strategy
- Resource allocation
You can track metrics to assess your accounts receivables performance, too. For example, you can track the day’s sales outstanding (DSO).
The DSO can tell you how long it takes on average to collect payments. You’ll want a DSO that’s below 30 days.
Otherwise, track your average days delinquent (ADD). You’ll want the ADD as low as possible, too. The ADD will indicate how many days on average payments are overdue.
This metric can indicate potential problems down the road. If customers aren’t paying on time, you could encounter financial issues.
Consider your collective effectiveness index (CEI), too. The CEI measures how many accounts turnover. You can measure the collectiveness of your collection’s performance as a result.
Without these metrics, you could struggle to make informed information about the company’s financial standing.
Instead, you can use these business metrics before taking unnecessary financial risks. You can also use these metrics to measure the company’s current health.
2. Project Metrics
Project metrics can help you plan and evaluate project-level development. You can analyze:
- Project costs
Your management teams will need to determine if a project will become profitable before getting started. Otherwise, they might waste valuable time and assets on a project. They can also use project metrics to determine how the success of a project can impact the company’s performance.
For example, you can determine ahead of time if a potential project will go over budget. You can also determine the proposed ROI for a future project.
Business performance metrics can help you eliminate bias when making decisions. Instead, you can gather the data you need to develop objective reasoning.
Metrics can also help you identify potential trends. You can mitigate the effects of a trend or encourage a beneficial trend affecting your industry.
Meanwhile, you can use your project metrics to track the progress of an endeavor.
3. Website Metrics
About 88% of online shoppers won’t return to a website after having a bad user experience. Meanwhile, 70% of online businesses fail due to bad usability. Tracking your website metrics can benefit your business, too.
If you accept orders on your website, it’s important to ensure your site is fast and easy to use. Otherwise, you’ll lose customers. They’ll leave your website and take their business with them.
If they leave without clicking around, your bounce rate could rise.
A high bounce rate, low clickthrough rate, and low dwell time can hurt your search engine ranking. Tracking these metrics can help you determine if it’s time to update your website.
When studying your website, don’t forget to track the:
- Task success rate – the number of correctly executed tasks per user
- Time on task – how long it takes a user to complete a task
- Search vs navigation – indicating the user’s preference between the two
- User error rates – indicating you need to improve the user experience
- Drop off rates – how many people leave your website
- Conversion rates – the percentage of users who complete an action
The time on task can tell you if there’s too much friction on your site. For example, you might realize it takes users too long to make a purchase. You could notice a higher cart abandonment rate as a result.
Adjusting your website with these business metrics in mind can help improve your online business efficiency. You can generate more conversions and boost sales.
4. Marketing Metrics
Marketing metrics can help you determine the efficiency of your current marketing campaigns. Otherwise, you might find you’re spending too much money on ineffective campaigns.
For example, for search engine optimization (SEO) campaigns, you can track:
- Domain authority
- Organic website traffic
- Page speed
For social media, you can track:
- Engagement (likes, mentions, tags, comments)
- Response time and rate
- ROI (referrals, conversions, etc)
- Awareness (reach and impressions)
Failing to track these marketing business metrics could impact your gross revenue and ROI.
Don’t forget to calculate customer satisfaction as well. Gathering information from your customers is crucial. The information they provide can help you make informed decisions regarding products, services, and campaigns.
If customers aren’t satisfied, they’ll turn away and take their business with them.
Kick Up Your KPIs: 4 Types of Business Metrics You Need to Track
Don’t neglect these essential business metrics. Instead, use high-quality business software to track your KPIs in one place. You can measure your business efficiency with ease.
Then, you can make more informed decisions regarding your business.
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