The aim of businesses is to create a successful product, or service, to sell and satisfy their customers. This is achieved by tracking the right business success metrics that are of importance to a specific enterprise. By identifying and measuring the appropriate numbers, it’s easy for entrepreneurs to work smart and reach the next level of success.
When you design your business strategy, how do you know whether or not your strategy is yielding the desired results? Well, the answer is in your metrics. With success metrics, you are able to quantify your progress. In other words, you have the ability to gauge whether or not your strategy is successful.
What are Business Success Metrics?
Business success metrics are quantifiable measurements that entrepreneurs, founders or CEOs use to track if their strategies and resources are working towards their set goals. Metrics are also referred to as key performance indicators (KPIs). There is no one-size-fits-all success metric; every company is different with unique missions and visions. Business metrics cut across all aspects that make up a company which include customers, employees, business owners, investors, and vendors.
As a business owner, settle for the metrics that will provide you with the best insights about the status and direction of your business: the ones that will enable you to effectively make decisions.
The business metrics, as earlier mentioned, depend on a company’s objectives. But here are some of the major metrics that entrepreneurs should generally monitor:
1. Return on investment (ROI): ROI is commonly used to decide whether or not an initiative is worth investing time or money into. This is used to track how well an investment is performing. It is the ratio between the income and investment. In most cases, investors focus on this business metric to decide if a business is worth investing resources or funds into.
2. Number of customers: This metric is straightforward. It is also directly linked to your sales and revenue. Customers are the people who buy what you sell so an increase in the number of customers will lead to more sales and more money for the business.
3. Revenue: This has to be one of the most informative and effective business metrics. A venture set up for profit-making is meant to bring in revenue. You can evaluate your company’s sales in order to gauge how much money is coming into the business. This metric also tells you if your products or services are satisfying the needs of your target consumers.
4. Net profit margin: The net profit margin evaluates a company’s ability to generate a profit in contrast to its overall revenue. This is done by subtracting all of a company’s sales expenses from the monthly revenue to determine just how much profit was made.
The net profit margin allows you to compare the organization’s income with the costs associated with running the business so that you can effectively predict long-term growth. Net profit margin can be improved by either increasing revenue or by lowering the costs of production.
5. Lead conversion rates: This metric determines how many leads (potential customers) decide to take the action of purchasing a product or service. Leads can be generated and converted with the help of several factors such as great customer reviews or testimonials, excellent customer service, a well-designed website, quality products and more. Tracking lead conversion rates will help you identify the areas that are preventing leads from becoming customers.
6. Net promoter score (NPS): This business success metric is a very important measurement of customer satisfaction. If your customers are not happy with your products and services, then what are you in business for? NPS is a numerical value which indicates how likely it is for your current customers to recommend your products and services to people. This can be gotten from the ratings and reviews of your business offerings.
7. Social Media Followers: This can be used to check your business success especially in the area of branding. Monitoring your social media followers growth rate on all platforms will show you how many people are interested in your initiative. It tells you whether you are on the right track or not. This is a good metric nowadays as most businesses have social media accounts to interact and stay connected to their customers and potential ones.
8. Employee Turnover Ratio: This is the rate at which your employees voluntarily leave working for your company excluding those fired. Companies should consider this a vital business success metric because it affects brand image. it indicates if employee satisfaction is guaranteed in your enterprise. This can also affect your output and productivity if you don’t have the necessary human resources to continue production.
9. Retention Rate: This metric measures how many customers return to purchase your product. Brand loyalty is imperative in any industry. Aside from leading to repeat purchases, great customer retention often results in customers that refer others to your company’s services or products, resulting in more sales. If you’re hoping to increase brand loyalty, you must first deliver quality services and/or products, but providing excellent customer service is another important component.
The opposite of retention rate is customer churn rate which refers to how often your customers stop doing business with your company.
10. Productivity: This is the measurement of how efficiently your company is producing goods or services to meet orders or market demand. This is calculated by dividing the total output by the total input.
These are among the top business metrics which can help in directing your business journey, there are so many other metrics out there as well. Always remember that when it comes to metrics, you should only work with the ones that are suitable for your business and what you want to achieve.
Aside from that, you should know that business needs can change over time, depending on the business phase. For instance, the success metrics that a newly launched business would focus mainly on are a bit different from the ones that a mature company would monitor.