Key Business Metrics for Measuring Your Company’s Success

Key business metrics

Business metrics are quantifiable measures of crucial business activities that enable brands to track, analyze, and optimize their performance. These metrics span various aspects of a business, including sales, marketing, finance, e-commerce, social media, and workforce management. By leveraging metrics, brands can gain valuable insights into their operations, identify areas for improvement, and make data-driven decisions to drive growth and success. Implementing best practices for tracking and interpreting metrics means that brands can derive maximum value from a data-driven approach to business management.

Why should you track business metrics?

By tracking key metrics for your brand, you can easily identify areas of strength to focus more on and weak points to address in order to improve your overall performance. Your tracking data should provide you with actionable insights that can help you make better business decisions for the future, whether it’s accurately allocating a budget, pivoting to a different business model or setting new goals.

Using metrics and the data they provide is also a good way to keep stakeholders and investors informed on the performance of a business. You can easily communicate growth by percentages, for example, or set objectives as KPIs that are transparent to your employees.

Below are the key categories of metrics you can measure across various aspects of your business.

Marketing metrics

Conversion rate: This measures the percentage of website visitors who take a desired action, such as making a purchase or signing up for a newsletter. It helps brand owners understand the effectiveness of their website and landing pages in converting visitors into customers.

Customer acquisition cost (CAC): This metric calculates how much it costs to acquire a new customer. This metric is important for determining the return on investment of marketing campaigns and allocating budget resources effectively.

Return on investment (ROI): ROI measures the profitability of a marketing campaign by comparing the cost of the campaign against the revenue it generates. This metric helps brand owners assess the overall impact of their marketing efforts on the bottom line.

Click-through rate (CTR): CTR calculates the percentage of people who click on a specific link or advertisement, helping to gauge the effectiveness of your messaging and and the content your create in engaging your audience.

Customer lifetime value (CLV): This is the estimate of the total revenue a customer is expected to generate over their lifetime with the brand, which is crucial for understanding the long-term value of acquiring and retaining loyal customers.

Financial metrics

Net income: This metric determines the revenue the company has generated after subtracting expenses and taxes, also known as earnings or net profit.

Profit margin: This calculates the percentage of a company’s profits against its sales or revenue. Essentially, a profit margin is the difference between the selling price of a product and the cost of producing and marketing it.

Working capital: This measures how liquid a brand’s finances are and calculates how much money is available to be used immediately instead of money that has been invested or held in other assets.

Receivables turnover: This metric is a measure of cash flow that is calculated by dividing net credit sales by average accounts receivable.

Payables overdue: This helps to monitor payments that are due to suppliers as a percentage of total accounts payable, and the rate at which the payments are made.

Operating cash flow (OCF): OCF measure the company’s ability to pay its liabilities from the amount of cash or money it generates from regular operations.

Cash burn rate: The burn rate of a company, especially a startup or new business, is a measure of how fast it uses up its capital before becoming profitable.

E-commerce metrics

Average order value (AOV): AOV refers to the average amount spent by customers in a transaction and is calculated by dividing the company’s total revenue by its total number of orders.

Best sellers: A business can track the particular products, or categories of products, that generate the most orders, which can help inform decisions on product development and manufacturing volumes.

Cart abandonment rate: This monitors and calculates the percentage of users who add a product to the cart but don’t proceed to checkout for a purchase.

Return and refund rates: These rates measure the percentage of sold items that customers end up returning and the dollar amount of refunds.

Sales and revenue metrics

Net sales: This is the total amount of income that a company gets from the sales of its goods or services sold, but with the value of customer refunds subtracted.

Sales growth: Sales growth is the percentage increase in sales when compared with a previous period of time, such as week to week, month to month or quarter to quarter.

Average selling price: This is the average dollar amount of each sale or transaction that a company makes. A higher average price may contribute to sales growth, even if the number of units sold (sales volume) decreases.

Sales cycle length: Sales cycle length calculates the amount of time a customer takes to make a purchase, from the initial decision to shop to actually buying the item. Sales cycle length can vary depending on the product, the price of the product, and even the type of person making the purchase.

Leads and response times: This metric tracks the number of potential new customers (sales leads) and the average time it takes to contact time after the period of initially reaching out, such as messaging a buyer a day after meeting them at a trade show.

Win rate: Also known as close rate, this measures the percentage of potential leads that successfully result in a sale, which is key for identifying conversions or helping to improve the sales process.

Quotas: This is a set of numeric goals that a company wants to achieve, and can be fixed as a minimum or maximum or average.

Social media metrics

Followers: This tracks the number of people that follow a business’ account on social media platforms, from new ones to those that unfollow over a certain amount of time.

Engagement: This measures the percentage of followers who interact with the content a brand posts on their social media, such as likes, comments, bookmarks and shares.

Impressions: An impression assesses the total number of people who view a social media post, which shows how much reach a brand’s content had beyond its followers.

Account reach: Tracking reach shows the total number of people who have viewed any of a business’ social media content during a given period, helping to estimate its potential audience size for brand awareness.