5 Critical Business Metrics Every Entrepreneur Needs to Track

5 Critical Business Metrics Every Entrepreneur Needs to Track

Did you know that about 20% of small businesses collapse within the first year, and the failure rate keeps increasing over the years?

While some of the causes of business failure are unanticipated, business metrics can keep you in the loop. 

What are metrics in business? A business metric refers to a quantifiable measure for tracking and assessing a particular business process’s status. The primary goal of business metrics is to track and monitor the progression of a company’s goals. 

The right metrics will help you know how your business is performing. You can then fix any identified problems before they escalate.

If you’re a new business owner, you might want to understand more about these metrics. Keep reading to know the key business metrics and why you need to track them. 


1. Sales Revenue 

Sales revenue is arguably one of the most crucial metrics for any company. Sales results will communicate whether people are showing any interest in purchasing your products or services. You’ll also know if your marketing efforts are paying off through the sales revenue.

Ensure that you consider all the factors that are likely to affect your sales revenue. When tracking the sales KPIs, take note of factors such as market changes, competitive actions, and previous marketing campaigns. Understanding these factors will make it easier for you to understand the changes in your revenue. 

You can calculate your sales revenue by adding up the income from all purchases and deducting any cost associated with undeliverable or returned products. 

2. Net Promoter Score 

The Net Promoter Score (NPS) is an index that ranges between -100 and 100. This business metric measures customers’ willingness to recommend the services or products of a company. It is an ideal measure for customer satisfaction with the business offerings and customer loyalty to a brand. 

Customer advocacy, according to the Net Promoter Network, is in three categories. These levels include:

Promoters (A score of 9-10)

The promoters are customers who are loyal enthusiasts of your business. They praise your company to their networks, leading to more sales and growth. 

Passives (A score of 7-8)

Passives are satisfied clients who aren’t as enthusiastic. They tend to leave you for better offers. These customers might not help with word-of-mouth marketing. 

Detractors (A score of 0-6)

Detractors are disappointed customers. This category of clients can collapse your business as they spread negative information based on their experience with your services or products. 

After you have calculated the Net Promoter Score, you’ll know how customers view your business. The best way to improve is through exceptional customer service and high-quality products. Work on ensuring that the user experience is at its best. 

3.  Gross Margin 

The gross margin is the sales revenue left after a company deducts the cost of production. The formula for its calculation is:

Gross Margin= Net Sales−Cost of Goods Sold

Tracking the gross margin makes it possible to monitor the value of each sale. With this value, you can tell how much a business is retaining for every dollar spent.

A business will know how its production cost relates to the revenue. If the gross margin is going down, a business will want to find ways of lowering the production cost. Some common measures include lowering the cost of labor and sourcing for cheaper raw materials.

Alternatively, a business can increase the price of its products to increase the revenue generated.

4. Customer Loyalty and Retention 

A recent survey showed that word of mouth is responsible for about 19% of all purchases. The only way to have effective word-of-mouth marketing is by having loyal customers. These clients will spread the word about your products based on their experiences. 

The Retention Rate is the number of clients that keep using your services or products for a specific period while also making repeat purchases. You can calculate the Retention Rate by getting the total number of customers at the end of a given period, like one year. Deduct the number of new customers, then divide by the number of clients you had at the start. 

You can achieve customer loyalty and retention by delivering high-quality products and commendable customer service. Your satisfied customers will then spread the word, leading to more sales. 

5. Website Traffic

Your monthly website traffic is among the business agility metrics that you can’t afford to ignore. As it stands, having an online presence for your business is non-negotiable. Once you have a website, keep checking for traffic and conversion. 

Google Analytics is one of the best ways you can check website traffic. You’ll know more about your website and the sources of traffic. 

Increasing your advertising budget can help with website traffic. You might also want to improve your social media marketing. Search engine optimization is another way that you can improve your traffic and online visibility. 

Are you worried that your metrics are not working, or you have no idea what to do with the metrics? Don’t panic! This company will help you build a business growth strategy that works.

Understanding Business Metrics Should Be a Priority for Entrepreneurs

Business owners need to know key business metrics for them to experience optimal success. Tracking and monitoring these business metrics will allow you to understand the areas that need improvement. You’ll also know more about your customers and how they view your offerings. 

The key business metrics that you monitor should consider your company’s processes, sales, and clientele. They should also be comprehensive to help you gauge your overall performance. 

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