Do you measure the performance of your business? How would you know that you have achieved the goals you had set out? You certainly can’t go with just a feeling. If you want to achieve measurable results, you will have to judge every move along with its financial outcome. And, this cannot be done without following business performance KPIs.
KPIs or Key Performance Indicators help in measuring and assessing the effectiveness of functions, processes, and solutions about your business. They take into consideration the strategic goals and measure target-based performance defined from the budget, planning or tactical perspective. Quantifying KPIs can help in determining whether you will be able to meet your business goals. As each business model is unique, picking the right performance metrics and effectively implementing them will help in enhancing your business performance.
Most key performance indicators focus on either of these objectives:
- Increasing revenue
- Enhancing efficiency
- Costs reduction
- Achieving customer satisfaction
Why is KPIs Significant?
The basic aim of performance metrics is to foster improvements in overall business performance. KPIs enable you to achieve your performance objectives by:
- Spotting potential opportunities or problems
- Setting business targets for company and staff intended to meet your strategic objectives
Here are 5 important business performance KPIs that will help you in monitoring the growth of your organization.
Sales Revenue (Monthly)
Your monthly sales revenue indicates whether customers are interested in buying your products, and how successful is your marketing strategy. Sales figures are greatly impacted by competitive actions and marketing campaigns. Therefore, increasing the revenue should be part of your long-term growth strategy.
Suppose you are monitoring the monthly sales revenue trends, and 68% of revenue is generated from existing customers, the rest is from new buyers. You would try to understand the success rate of your marketing campaign and make attempts to increase your sales revenue for the future.
Purchase Funnel (Weekly)
A funnel highlights the deals in progress, approximate timelines, booking value, and the possibility of closure.
According to Guy Chriswick, MD of Webloyalty, ‘Consumers now spend 34% more time on shopping for fashion than they did ten years ago. Taken alongside the increasing use of online channels by consumers as part of this process, this offers the opportunity for brands to “personalize” the purchase experience.’ Hence you can gauge the timeline for moving from top to bottom of the purchase funnel is much prolonged.
Customer Lifetime Value (CLTV)
CLTV is a metric that monitors the value derived by your organization from a long-term client relationship. You can utilize this KPI to shortlist the channels that add premium customers at the ideal price.
CLTV is more beneficial when compared to CAC. If the cost to acquire a new customer is $12K and your CLTV is also $12K, your CLTV/CAC ratio is equal to 1. A 3:1 ratio CLTV/CAC is considered ideal by industry experts.
Customer Counts (Monthly)
The number of customers you have is crucial for estimating your operating capacity. You need to know the number of new clients added each month.
You can estimate the share of new to existing clients. You can track how many new customers are attracted to your site every month.
NPS (Net Promoter Score)
NPS (Net Promoter Score) reflects your company’s product quality and customer satisfaction level. Promoters with a score of 9-10 are considered loyal enthusiasts, those with a score of 7-8 are passive, unenthusiastic customers and those with score 0-6 are detractors or disappointed customers.
As per SPG Consulting, the average NPS is recorded at 34.3%. There is a global rating scale that helps companies to interpret NPS results. This scale focuses on 2 goals – minimizing detractors and generating promoters.
Besides, these 5 metrics another important parameter you need to consider is the leads-to-close ratio. Leads are critical for any marketing and sales team, as the more leads you generate, the greater sales opportunities, and higher the chances of progress in sales. But every lead lifecycle has different stages, which calculates the leads received over a period and the leads which you’re finally able to close. An MQL (Marketing Qualified Lead) is more engaged compared to normal leads but they have not turned into full-fledged customers. A SQL (Sales qualified lead) is considered the one in which the sales team can follow-up for direct sales. So, you must keep track of MQLs and SQLs for estimating the leads-to-close ratio.
In a nutshell, every company must track their business performance metrics, to monitor their growth and achieve customer satisfaction. You shouldn’t neglect the metrics mentioned above and calculate every KPI to interpret the data correctly. And, proactively resolve the issues before they damage your business growth.
For questions regarding business performance KPIs for your organization, feel free to contact us at firstname.lastname@example.org