Do you know how well your business is doing? Is your revenue growing every month as your sales continue to climb or have you entered a serious decline that you need to reverse if your business is going to survive?
If you are not closely monitoring your KPI’s you may not find the answer to that question until it’s too late. KPI’s or Key Performance Indicators are the metrics that you need to watch so you can track how your business is doing each month.
One of the major issues for many business owners is trying to decide which figures they should be monitoring. Even a small business can generate so much information, that anyone trying to track everything will soon become overwhelmed and either give up or simply get lost in the volume of statistics.
Read On: What is a KPI? (The Complete Guide)
There is a famous quote from Albert Einstein:
“Not everything that can be counted counts, and not everything that counts can be counted.”
The most important point for any business owner to decide what the key areas are that will ultimately determine whether their business is continuing to grow. Don’t try to measure too many areas at one time, focus on five or six areas. Best is to set up your own project dashboard with key metrics or even use KPI software for it. Nevertheless, remember, measuring your KPI’s is just the start of the process. To gain any benefit you will need to act on what you find.
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What are my KPI’s?
The KPI’s you need to measure will vary from business to business depending on the business model used, and it may require some careful thought, and even experimentation to decide what is important for your business and should be included in your KPI dashboard. Typically, the following metrics will appear somewhere on your list.
These five are a good place to start looking at KPI’s as they are relevant to almost all businesses.
- Churn rate
- Monthly recurring revenue
- Average revenue for each customer
- Customer acquisition cost (CAC)
- Customer lifetime value (CLV)
If you’re looking for a more comprehensive overview of various KPIs, see the guides for digital marketing metrics and KPI examples.
1. Churn rate
Are you keeping your customers? Any successful company remains in business by retaining customers.
Your Churn rate is the rate at which customers leave each month. If you have a high percentage of people who are so unhappy with your service that they leave then you have a major problem that you need to fix right-away. There is little point worrying about adding new customers, or growing your business if you can’t even keep the customers you have. You need to start talking to your customers and try to understand the reason they are leaving. This step is critical if your business is to start growing.
2. Monthly revenue
To track monthly revenue simply look at the amount of money that your business makes each month. For some businesses, this may be the correct metric to track. If however, you operate on the basis of monthly subscriptions for your product or service then it makes much more sense to track your monthly recurring revenue. To discover if your subscription service is sustainable you will need to determine how much revenue are you adding (or losing) each month. One month on its own doesn’t provide a big enough picture. You must be assured that the same revenue stream will be there month after month.
If you’d like to keep your eye on your company’s budget, get a CEO dashboard that gives a quick overview of your business’s most important performance metrics.
3. Customer acquisition cost
How much does it cost you to get a new customer? Advertising is an expensive business. Are the advertising channels you are using producing the results you need. Take your marketing budget for a month and check it against the number of new customers you gained during the same period. This is a quick way to see how much each of those customers cost you. Now you can compare that with how much each customer spends with your company.
4. Average revenue for each customer
How much money do you make from each of your customers? If you want your business to grow the most effective way to do that is by increasing the amount of money that you receive from each customer. You can do this through cross-selling, and up-selling. To put it another way, every time your customer buys a product they should be given the option to upgrade their choice or to purchase additional add-on services to enhance their experience and to maximize your revenue.
5. Customer lifetime value
What is the total value of each customer? Study your business churn rate and the average revenue gained from each customer each month. This will show you the lifetime value of your average customer. This is very useful to know, especially when compared with the average cost of acquiring the customer in the first place.
To get a complete overview of customer acquisition, you should start using a sales dashboard that demonstrates all the important sales KPIs.
Use these 6 KPI’s as a guide to determining if your business is really growing. If it isn’t yet growing, these same metrics provide a great starting point for you to work out what is wrong and start turning things around. Moreover, it may be worth getting a good KPI software that gives you an overview of all your most important KPI’s in a compact KPI dashboard format. In either way, you should keep an eye on your metrics to accelerate growth.
