8 Business Metrics to Track

Sustained, long-term business growth is a result of planning and effort. Data analysis helps small business leaders see the results of a particular initiative or change, gain insight into their operations and plan for future success. 

Business metrics can be valuable for owners and executives as they look for possible issues and develop solutions to improve their operations. Tracking these metrics is crucial for boosting your small business' performance. This guide outlines several key business performance metrics and how to use them to measure your company's growth. 

What Are Business Metrics? 

Business metrics are measurements of your business' performance across multiple areas. They may be department- or team-specific, assessing successes in sales, marketing, manufacturing and more. 

Business health metrics are critical to track because they provide data-driven insight that can help fuel growth. Numbers like customer acquisition cost and churn rate let business leaders keep their fingers on the pulse of their company's health. These metrics equip executives to make more informed decisions regarding their operations and planning. Ultimately, the various types of metrics in business can be invaluable tools.

There are many kinds of company performance metrics, so tracking the correct ones is essential. Some leaders may want to keep tabs on everything, but narrowing your focus only to a few mission-critical areas will likely be more productive. When you want to start paying attention to these metrics, home in on the ones that significantly impact your needs and objectives. 

How Do Businesses Use Metrics? 

Businesses use metrics to measure company or departmental functions over a set period. Business efficiency metrics reflect how different departments interact with and affect each other, resulting in tangible effects on the entire business. 

Here are a few specific ways businesses use metrics to drive growth. 

• Performing comparative analysis: Businesses have specific quarterly and annual targets to hit. Tracking metrics helps companies identify whether they are meeting, exceeding or falling short of success benchmarks. 
• Connecting work to goal achievement: Everyday tasks have a measurable effect on business success, and tracking performance metrics proves it. When every department prioritizes specific tasks that align with its business metrics, the company can achieve its organizational goals.
• Assessing strategies: Tracking business growth metrics helps your company decide whether a new marketing strategy, trading partner or other tactic is helping you meet objectives. 
• Achieving compliance: Some governmental or industry authorities require companies to comply with laws or industry standards. Business metrics provide a gauge for whether a company is following regulations. 
• Increasing communication: Reporting on company performance metrics is a valuable opportunity for executives, department heads, supply chain partners and shareholders to communicate about the business' performance. 
• Making data-driven improvements: Business metrics bring operational challenges to the surface and might help identify a solution. 

What Business Metrics Should You Use?

The business metrics your company uses will depend on your specific and unique goals. Before you begin tracking key business performance metrics, define your objectives. Consider the business metrics below and ask whether each is relevant to helping your company achieve a specific purpose. Then, track the ones that are likely to have the most significant positive impact on your business' operations. 

Consider these eight essential business metrics to track to drive organizational growth. 

1. Growth Rate 

Growth rate refers to a company's year-over-year growth. This key metric in business contrasts your company's overall health with the previous year. You can compare your business' growth rate with others in your industry to determine how well you beat competitors. 

2. Net Sales Revenue  

Revenue is critical for any business. Net sales revenue determines how much your company made from sales after subtracting discounts, returns and their associated costs. This metric helps you identify how well your products and services are performing and how successful your marketing efforts are.

3. Net Profit Margin

Net profit margin is critical for determining how much profit you make for each dollar of revenue. Revenue increases don't necessarily mean profitability also increases. With this metric, your company can compare income with operating costs to predict long-term growth and make adjustments. Calculate net profit margin by subtracting sales expenses from monthly revenue. 

4. Customer Acquisition Cost 

CAC is how much your company spends to acquire a single customer. Because CAC considers costs like marketing and sales, media spending and staff salaries, many businesses calculate it annually. CAC accounts for marketing and sales spending. 

5. Cost Per Lead

Another marketing metric, CPL determines how much it costs for your company to identify and attract a single lead before making them a customer. Knowing CPL is valuable for helping you budget for marketing, sales and customer service. A high CPL for a particular marketing channel may not mean you need to drop it — it depends on the lead conversion rate for that customer segment. 

6. Customer Retention 

Once you see how costly it is to acquire new customers, you'll understand the importance of retaining your existing ones. The customer retention rate measures how many customers remain with your business over time. You can calculate customer retention monthly, quarterly or annually. This metric pinpoints how much customers value your products, services and ongoing customer support. 

7. Customer Lifetime Value

CLV is a measurement of how much revenue your company can expect to earn from a typical customer. This number may vary greatly depending on your business' nature and the products or services you sell. Tracking CLV requires multiplying the value of the average sale by the average customer retention time and the number of transactions the customer makes during that time. CLV helps determine issues reducing customer retention and which customer segments are most profitable. 

8. Employee Satisfaction 

Employee satisfaction and retention are critical for your business' success. It can be costly to hire new employees, and retaining them will help your business become more productive and successful. Determine employee satisfaction at your company by sending out regular surveys and gathering feedback from your team. It may also be helpful to track employee retention over a set period.  

Tracking Business Metrics With ERP

Using the right tools is essential for helping leverage your company's business metrics. An enterprise resource planning solution can help your business stay on top of the metrics that matter most for growth. ERPs make it easier for your company to generate real-time metrics, saving time and empowering your teams to track essential metrics and continue driving toward success.

The Vested Group is an award-winning NetSuite Solution Provider offering a range of NetSuite's ERP products designed to fit your business needs. Our knowledgeable, experienced and reliable TVG team provides businesses with the support they need to successfully implement NetSuite in their operations. NetSuite named us their Partner of the Year for our dedication to working with companies at every step, from NetSuite consulting to customization and post-installation support. 

Contact The Vested Group today to discover how we can help your small business track its metrics for higher growth.