To run a successful business, you must implement the right strategies and track the right business metrics. And here are 15 essential metrics to your business growth.
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Do you know why both these companies achieved stellar results?
It’s because these companies set relevant business goals and tracked the improvements in those goals with business metrics that influence those goals.
Simba, for example, tracked business metrics such as ROAS (return on ad spend), CPA (cost per acquisition), and ROI (return on investment) as their strategy focused on ads. Feel Unique, on the other hand, relied on metrics such as search volume and organic visibility as theirs was reliant on SEO.
If you want to run a successful business like the above two companies, you must also create strategies and track the right business metrics that can influence your result.
What are Business Metrics or Key Performance Indicators (KPIs)?
Business metrics are also known as business performance metrics or key performance indicators (KPIs). They are quantifiable values that can help track the performance of a business and its end goals.
Key performance indicators help indicate if your strategy is failing or succeeding and if you need to make any modifications to boost results. They can also help you measure how long it takes to reach your goals. All this data can help you set more realistic goals and achieve results on time.
The key performance metrics you track should range from the above-mentioned marketing metrics to sales metrics to employee performance metrics. All these together will help you execute a business strategy that works. Therefore, to help you find and track the right ones, I have listed the 15 most important business metrics. You should be monitoring them to growth hack your business.
15 Business Metrics You Should Be Tracking
1. Website Traffic
Website traffic is an important metric you should be monitoring. But you shouldn’t just look at plain traffic. You need to get more granular and look at metrics such as month over month traffic.
As time passes by, your traffic should increase. It will help you check whether your SEO and other marketing efforts are providing results. You might also want to check other traffic metrics such as sources, new vs returning visitors, location, session length, bounce rate, etc.
But remember that traffic by itself means nothing. What matters, even more, is if the traffic is converting. It is the reason why you should be monitoring the next couple of metrics too.
2. Leads Per Month
Leads per month are the number of people who sign up every single month. This sign up could be to a lead magnet or a demo or a webinar or a consultation call. The one you choose will depend on your goal.
Once you know the number of leads you generate per month, you will be able to determine how much traffic you need. For example, let’s say you get 1000 visits and 50 leads per month. It shows that your conversion rate is 5%. Therefore, you will know that to get another 25 leads per month; you will need 500 extra visits every month.
By the way, a 5% conversion rate can be a high figure as the average site converts at 1.95%.
Of course, there are high converting landing pages such as webinar landing pages that can achieve conversion rates of up to 80%. Therefore, if you wanted to increase your conversion rate quickly, it will be better to direct traffic to a specific landing page than a homepage.
3. Leads to Sales Conversion Rate
Not all leads will convert to sales. So, you also need to track leads to sales conversion rate. It is the number of sales by the number of leads multiplied by 100.
So, if you generate 20 sales from 50 leads, your conversion rate will be 40%. The data can help better your sales conversion rate and predict your traffic to sales conversion rate. This can make it easy to forecast revenue.
4. Return on Ad Spend (ROAS)
Return on ad spend is the amount you earned from a purchase or several purchases divided by the amount spent on advertising. For example, if you generate $1000 and spend $200 on social media advertising, your ROAS will be 5.
It means that for every $1 you invest, you will generate $5. Knowing the ROAS beforehand helps you predict how much money you will earn from your advertising efforts. You can use it to set the right advertising budget and monitor it to ensure you convert at the same ROAS throughout the campaign.
Here’s an example of AppSumo’s ROAS from our Facebook Ad Manager dashboard:
5. Customer Acquisition Cost (CAC)
Customer Acquisition Cost, also known as the cost of customer acquisition, is the total cost of sales and marketing over a specific period of time to acquire a customer.
You can calculate the cost of acquisition by taking the total amount spent on marketing and sales over a time period and dividing that with the total number of customers acquired. The result will show you how much it costs to acquire one customer.
It is a more accurate figure than just relying on one marketing business metric.
6. Customer Retention Rate
Custom retention rate is the percentage of customers retained by your company over a set time frame.
You can calculate it by taking the number of customers at the end of a period, subtracting the number of new customers acquired during that period, then dividing this by the number of customers at the start of the period and finally multiplying it with 100.
The way you look at customer or user retention rate will depend on the type of business. For SaaS companies, customer retention is the number of people who continue subscribing. While for e-commerce stores, it will be the number of returning customers.
7. Customer Lifetime Value
Customer lifetime value is the business metric that helps predict the total revenue your business generates from a single customer.
You can calculate customer lifetime value by subtracting the cost of serving and acquiring a customer from revenue generated from a customer.
It will help you check if all those marketing campaigns and servicing costs generate profits over the long term. It costs less to keep customers than to acquire new ones. So, it’s a good sign if this metric is high.
8. Net Promoter Score
Net promoter score is a business metric that helps you measure customers’ relationship with your company. Your customers answer a key question, with the answer on a scale of 1 to 10. Here’s an email ConvertKit sent to its customers:
After getting the response, you subtract the percentage of detractors from the percentage of promoters to get the net promoter score. The score can range from -100 to +100.
Source: Net Promoter
The net promoter score shows how satisfied your customers are with your product and/or service. A score of -100 indicates that all customers are detractors while +100 means all of them are promoters. And your goal is to get the score as close to +100 as possible.
9. Net Profit Margin
Net profit margin is the business metric you use to measure profitability. You calculate it by first figuring out your net income. It’s the cost of the selling price minus marketing fees, cost of labor, product development, taxes, etc.
You then divide the result with revenue and multiply it by 100. If you want to run a profitable business, this is an important metric to track.
The problem with business metrics like the CAC and ROAS is that they only take marketing spend into consideration. They will indicate if your marketing strategy is working, but you won’t know if you are profitable and if your current strategy is sustainable.
10. Monthly and Yearly Sales Growth
Tracking monthly and yearly sales growth will help you check if your business’s revenue is growing.
You calculate it by subtracting total sales Revenue from Month #2 with total sales Revenue from Month #1, then divide it by Revenue from Month #1 and multiplying it by 100.
11. Cash Flow
Cash flow is simply the amount of net money being transferred in and out of your business. This transfer can occur through the products or services you sell, the companies you acquire, or by raising cash through loans and equity trades.
Cash flow will help determine how well your business is equipped to pay its employees, shareholders, invest the money back to develop products and services, etc.
12. Overhead Costs
Overhead costs are costs incurred by the business that aren’t related to creating the product or service. They can range from fixed, variable to a fixed-variable hybrid.
Fixed overhead costs include payments such as insurance and rent. Variable overhead costs include expenses such as utilities and office supplies.
Hybrid costs would be those where you need to pay a certain fixed amount, but they can go up or down. An example is salaries. You will have a fixed amount in your employees’ contracts, but you might need to pay extra for overtime work and bonuses. This will vary monthly.
13. Training Cost per Employee
As the name suggests, this is the amount it costs your business for onboarding new employees. Employees won’t just be able to begin working at the highest level as soon as they join your business.
They need to go through a training phase. For this, you will not just be paying someone to train the employees, but you will also be paying the new hires their salaries.
14. Employee Happiness
Employee happiness, sometimes also known as employee satisfaction is a metric used to determine how happy or satisfied employees are with their job. It is determined by looking at factors such as workload, compensation, work-life balance, satisfaction with management, etc.
Just like how you use the NPS to measure your customer’s satisfaction, you can use a similar survey to measure your employee’s satisfaction and happiness:
15. Employee Engagement
Employee happiness only looks at how happy they are with their jobs. In comparison, employee engagement takes happiness and various other factors, such as how passionate they are about working for your company and their loyalty into consideration. It also looks at how willing they are to help the company grow.
Employee engagement is a more useful metric as it can help determine how productive your employees will be and how much effort they are willing to put in.
Engaged employees won’t just see the workplace as a place where they put in some effort in exchange for a fee. They will feel a big part of it. They will also generate word of mouth.
How to Track Business Metrics
The above 15 business metrics are the important ones you should consider tracking while running a business. But you can’t track them all using the same methods. You need different tactics and tools to monitor them. Here are some useful tools and techniques you can use.
Use Surveys to Track User Experience, Customer Satisfaction, Etc.
Most business metrics are easy to study and track by just using simple analytics tools. But metrics such as net promoter score, employee happiness, and employee engagement can be hard to measure using an analytics tool. Hence, you should be using surveys and feedback forms to gather this data.
Feedback forms can be used to directly ask customers to rate your business on a scale of 0 to 10. You can also use multiple choice questions and long answer questions for this.
An example is this feedback form that popped up when I recently visited my WP Engine Dashboard.
Source: WP Engine
This little survey led to a detailed survey they created where they asked me how likely I am to recommend the product and many other questions.
Source: WP Engine
You, too, should be creating similar surveys to measure net promoter score, employee happiness, and engagement.
For this, you can use a tool like HappyForms. It lets you create custom surveys.
It usually costs $69 per year, but through Appsumo’s special deal, you can get it for a one-time payment of $49 for life.
Another excellent tool for getting customer feedback is Announcefly.
You can get it for life with a one-time payment of $59 on Appsumo.
Use Analytics to Track Marketing Performance Metrics
For tracking marketing KPIs like traffic, leads, and sales, you can use a tool such as Google Analytics. And for monitoring metrics such as ROAS, you can use built-in analytics on platforms like Facebook and Google Adwords.
But the problem with using multiple tools to track data is that it can take up a lot of time. If you want to save time, you might want to use a dashboard tool or an analytics tool that integrates all this data and lets you track it from one place. One such tool is Jepto.
It connects with Google Analytics, Adwords, Google My Business, Google Search Console, Facebook ads, Google Data Studio, etc. You can view data from all these platforms in one place. Depending on the plan you pick, you can use it to track 5 to 500 KPIs.
An annual plan for Jepto would usually cost you $588, but you can get it for $499 on Appsumo.
Use Project Management Tools with Time Tracking
Another way to track employee-related metrics is by using a time tracking tool. They will show you how much time your employees are spending on a project, how much time it takes to train them, their productivity levels, etc.
For this, you can use a tool like Plutio. It can be used to manage employees and track time.
It can also be used for various other tasks like creating proposals and contracts. You can also use it to create surveys and feedback forms to collect answers. Plutio’s annual plan costs $360, but you can get it for $199 on Appsumo.
Use Accounting Software for Finance Related KPIs
Accounting software can help you track metrics related to sales, marketing, overhead, profit, etc.
One of the popular ones is FreshBooks. It integrates with bank accounts, payment getaways, e-commerce platforms, payroll software, marketing platforms, and so many tools.
Data from all these software can together track a vast number of KPIs.
They also have a mobile app that you can download from the App Store and Google play store.
Choose and Track Your Business Metrics
As you can see in the above post, there are many essential key performance indicators you should be tracking. But these are only some of the most important ones. There are several other important metrics, such as user engagement, app purchases, monthly active users (MAU), etc.
The key metrics a business needs to track will vary from company to company. This is why I recommend that you get your sales team, marketing team, development team, and other teams to sit down and brainstorm more important metrics that matter.
After that, you can pick the right tools to track these metrics. You can use some of the tools we recommend above for this. If you want more tools to simplify KPI monitoring, you might want to check out Appsumo. There are many more deals here.