5 Most Important Business Metrics for Any Company

Photo by Luke Chesser

Becoming an entrepreneur is one of the most liberating endeavors that you can pursue. After all, there’s a reason why most people would ditch their 9 to 5 if they had the opportunity to.

But, there are certain metrics for business performance that you’ll need to keep an eye on in order to facilitate your success. This is particularly true for those who have just started their own company.

Not quite sure how to begin? We’ve got all the info you need. Let’s explore everything you should keep in mind.

1. Lead Generation Cost

As you may expect, lead generation is one of the most important metrics that you need to keep a close eye on. In order to facilitate future sales, you’ll need to get your product or service in front of your audience.

But, you also need to put effort toward getting them to take the desired action. For example, you might invest in an email marketing strategy to send offers that your target demographic might be interested in.

The money that you spend on this process is one of the many costs associated with lead generation. Unfortunately, having a high amount of revenue from your company sales could be offset by a notably high budget for lead generation.

So, it’s imperative to ensure that you aren’t spending too much in this category.

2. Customer Satisfaction

Unlike most other business metrics, customer satisfaction is something intangible that you can’t assign a concrete value to. In fact, it can be difficult to fully understand how satisfied your customers are without putting forth the effort to find out on your own.

This is typically accomplished form of surveys, directly asking for feedback, etc.

Customer satisfaction is also often quantified through methods that vary from business to business. For example, a company may consider a client to be satisfied as long as they are not dissatisfied with the business of service.

Regardless of how you choose to define customer satisfaction or acquire information about it, it’s imperative that you prioritize it.

3. Fixed/Variable Costs

You won’t be able to properly budget until you have a full understanding of the costs your company incurs each month. As the name suggests, these typically come into different forms: fixed and variable.

Fixed costs are expenses that do not change over time. This could be something like a rental payment, money that you put toward business-related debt, recurring certification expenses, etc.

Variable costs are not always consistent as time goes on and could even change from week to week. Common variable costs that businesses deal with are commission payments, raw materials, and labor.

It’s highly unlikely that these costs will not remain identical as the months go on. This is particularly true as you begin to scale your company, as your production costs will begin to increase as your business grows in size.

By understanding your fixed costs and the expected range of your variable costs, you’ll be able to develop a more accurate budget for your business. This will allow you to make the necessary investments, such as purchasing new equipment or allocating funding toward information technology.

4. Sales Revenue

This is relatively similar to a business’s lead generation cost.

In order to track the overall performance of your sales techniques, you’ll need to keep an eye on your overall sales revenue. It’s important to note here that revenue doesn’t directly equate to profit.

In some cases, it’s possible to have a large amount of revenue but only have a small amount of profit after factoring in the expenses associated with generating that money.

To elaborate, a business might spend $20,000 for a marketing campaign that generates $40,000 in revenue. But, other associated expenses combined with the marketing budget could leave you with a profit of only $8000.

However, if the next $20,000 marketing campaign generates $60,000 in revenue, you’ll know that the second campaign was more effective. Over time, increasing revenue while maintaining a similar budget is a reliable way to generate increased profit. Reducing costs and achieving the same amount of revenue will also increase your total profit.

Of course, you can’t neglect your…

5. Gross Profit Margin

Your sales revenue will only give you insight into your sales performance. Your gross profit margin will help you define how well your company is doing overall.

As you may expect, a business that can drastically increase its gross profit margin from year to year will be able to scale at a significant rate.

Additionally, your profit margin is a whole number as opposed to a percentage. This means that your overall profit margin can increase even when your company’s performance isn’t ideal.

This is something that many companies have seen throughout COVID-19. The slump they experienced from the restrictions and economic impact of the pandemic did not always definitively damage a gross profit margin.

So, the better you understand this metric, the better idea you’ll have of your company’s overall performance. With this information about business metrics in mind, you can make the appropriate changes that are best for the future of your business.

Understanding These Metrics for Business Performance Can Seem Difficult

But the above information will make the process far smoother. From here, you’ll be able to use these metrics for business to your advantage and make the decisions that are best for the growth of your company.

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Originally published at actitime.com

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