Harness the power of effective business performance metrics to proactively steer your business to success.
Every organization, big or small, requires regular checks and adjustments to operate efficiently. But achieving harmony and efficiency across the company poses a challenge.
However, setting up performance metrics lets you focus on vital data, promptly address arising issues, and forecast growth trajectories. Without these insights, you risk making decisions based on assumptions or outdated information, leading to missed opportunities and inefficiencies. Here’s how to measure the most essential business performance metrics and leverage them for growth.
12 key business metrics to track
From back-end sales numbers to the frontline workforce, these business performance metrics examples offer a comprehensive view of your company but also pinpoint areas ripe for enhancement and growth.
1. Sales revenue
Sales revenue is the total income earned selling products and services. Comparing monthly sales revenue lets you gauge the effectiveness of your marketing strategies, determine your market standing, and evaluate your company’s overall viability.
To calculate sales revenue, multiply the units sold by their respective prices and subtract the costs of returned or undelivered products.
Sales revenue = (number of units sold ✕ price of each unit) – cost of returned or undelivered products
Expanding your product catalog, targeting untapped markets, investing in sales and marketing teams, and launching effective advertising campaigns are all impactful ways to increase sales revenue. If you’re a web design firm, for example, consider introducing a website maintenance package or offer template customization to cater to clients wanting ongoing support or a personalized touch.
2. Net profit margin
Net profit margin measures the proportion of revenue that remains as profit after deducting all expenses, including taxes, salaries, and operational costs. This business metric offers insights into your company’s efficiency at converting revenue to profit, with a higher net profit margin indicating better profitability.
To calculate your company’s monthly net profit margin for a specific period, divide your net profit by the total revenue and multiply this number by 100.
Net profit margin = Net profit / Total sales revenue ✕ 100
Understanding net profit margin proves invaluable in forecasting monthly expenditures and plotting long-term growth. By continuously monitoring this percentage, you assess your company’s financial stability and ability to expand — when revenue surpasses expenses, you’re ready to scale.
To enhance your net profit margin, prioritize operational efficiency and cost containment. You optimize your revenue flow by identifying and eliminating unnecessary expenses and adjusting your prices when feasible.
3. Gross margin
Gross margin represents the percentage of revenue after deducting the costs of goods sold. It’s the proportion of sales revenue retained as profit after subtracting overhead expenses, like rent, utilities, payroll, and insurance.
Here’s the formula to calculate gross margin:
Gross margin = (Total revenue – Costs of good sold) / Total revenue ✕ 100
A higher gross profit margin indicates that a larger portion of each revenue dollar goes toward covering fixed costs and generating profit. It also offers insights into how efficiently your business produces goods and manages pricing. You can improve your gross margin by reducing operational costs, setting competitive prices, and negotiating better deals with third-party suppliers and distributors.
4. Customer loyalty and retention
Customer loyalty and retention metrics measure how consistently customers return to buy your company’s products or use your services over time. High rates reflect the value and satisfaction customers derive from your offerings.
To quantify customer loyalty, you must calculate your business’s retention rate. Subtract the number of customers acquired over a fixed period (say, a year) from the number of customers at the end of that period. Then, divide this by the number of customers at the beginning of that period and multiply it by 100. Here’s the formula:
Customer retention rate = (Number of customers at the end of a fixed period – Number of customers acquired during that period) / Number of customers at the beginning of the fixed period ✕ 100
Fostering a loyal customer base helps increase brand awareness through recommendations and word of mouth. Consistently returning customers signify steady revenue, and they often have higher lifetime values and purchase more over time. Retaining existing customers is also five to six times less expensive than acquiring new ones, making it a cost-effective strategy.
To boost loyalty and retention, consider personalizing experiences with tailored discounts and loyalty programs, improving customer service, addressing feedback, and delivering high-quality products and services.
5. Qualified leads per month
Qualified leads are potential visitors who express a genuine interest in your products and services and have a higher likelihood of becoming customers. This metric gauges the efficiency of your targeting efforts.
You can group leads into four categories:
- Information qualified leads (IQL): Also known as cold leads, IQLs are prospective leads at the beginning of the sales funnel at the stage when a company encourages visitors to provide their personal information (name, age, contact information, etc.) for information on products and services
- Marketing qualified leads (MQL): Also called warm leads, these are leads that your marketing team reviews and verifies if they meet the necessary criteria, such as age group, location, and preferences
- Sales accepted leads (SAL): Leads that the marketing team passes to the sales team after verification, who start the conversion process
- Sales qualified leads (SQL): Leads vetted by the sales team that have the highest probability of converting into customers
You’ll receive more leads as your business grows and your marketing efforts intensify. However, not all prospects become paying customers, so remember to focus on quality over quantity. To increase qualified leads, fine-tune your marketing campaigns to target the right customers and personalize content to resonate with those most likely to convert. This strategy optimizes conversion opportunities, fueling revenue growth.
6. Lead-to-customer conversion rate
The lead-to-customer conversion rate measures how effectively your sales team turns potential visitors into paying customers. It directly reflects the efficacy of your sales process and the quality of leads your team generates.
Calculate your company’s lead-to-customer conversion rate by dividing the number of converted leads by the total number of leads and multiplying the result by 100.
Conversion rate = Number of converted customers / Number of total leads ✕ 100
Sales revenue leans on the ratio of leads your sales team converts into customers. To bolster conversion rates, promote your brand and create positive first impressions with an optimized website, excellent reviews, responsive customer service, and an attractive social media presence. Every touchpoint with a potential customer should convey quality and trustworthiness, nudging them closer to a purchase decision.
7. Customer acquisition cost
Customer acquisition cost (CAC) includes all the costs required to gain a new customer, including marketing and sales expenditures, directly affecting your profitability. A lower CAC means acquiring customers more cost-effectively, leading to better profit margins. Conversely, a high CAC might indicate inefficiencies in your marketing and sales efforts or that you’re targeting a challenging or incorrect market segment.
Calculate your CAC by dividing your company’s marketing and sales costs by the number of customers acquired over a fixed period.
Customer acquisition cost = Marketing and sales costs / Number of new customers acquired
You can lower your average customer acquisition cost by focusing on high-profit market segments. Streamline your marketing campaigns for precision targeting and focus on the most promising leads, such as marketing qualified leads. This ensures you’re allocating resources to strategies that offer the best return on investment.
8. Net promoter score
Net promoter score (NPS) measures customer loyalty and satisfaction by asking existing customers how likely they are to recommend your products and services to others.
Customers respond on a scale of 0 to 10, leading to three loyalty categories:
- Promoters (9–10 score): Loyal customers who regularly promote your business and recommend your products and services to friends and family
- Passives (7–8 score): Generally satisfied but may abandon your brand for competing offers
- Detractors (0–6 score): Dissatisfied customers who speak negatively of your brand
To calculate your net promoter score, subtract the percentage of detractors from the percentage of promoters.
Net promoter score = Percentage of promoters – percentage of detractors
Boost your net promoter score by improving customer service, personalizing the user experience, addressing complaints and concerns, and expanding on existing offerings at competitive prices.
9. Customer lifetime value
Customer lifetime value (CLV) measures how much revenue you expect to earn from a single customer throughout their relationship with your brand. A higher CLV suggests you’re effectively maximizing the value from each customer.
Calculate CLV by multiplying the average purchase amount by the purchase frequency and the expected lifespan of the customer-brand relationship.
Customer lifetime value = average purchase value ✕ purchase frequency for month ✕ customer lifespan
To improve CLV, cultivate brand loyalty and customer satisfaction. Implement personalized email marketing campaigns, fine-tune your search engine optimization (SEO) strategies, and deploy targeted advertising. Promptly addressing customer concerns can also transform potential setbacks into trust-building moments, further enhancing long-term revenue potential.
10. Website traffic
Website traffic measures the volume of users visiting your website and interacting with its content.
You can use tools like Google Analytics to monitor website traffic and sub-metrics, including page views, bounce rates, and time on page. Tracking these metrics allows you to better understand your audience and their preferences. For example, sites with high bounce rates indicate issues like slow loading speeds or a lack of responsive design.
You can improve website traffic by elevating your SEO practices, creating relevant content that resonates with your audience, and promoting your brand through social media and other online channels. This continuous monitoring and adaptation enhances the user experience and paves the way for better conversions and brand recognition.
11. Team satisfaction
Team satisfaction shines a light on employee morale, participation, and job satisfaction. Happier workers increase productivity, making them valuable contributors to your company’s success.
To measure employee satisfaction, gather feedback using surveys, which can address company policies, responsibilities, and work-life balance. Then, improve team morale by investing in their skill development, encouraging open communication, cultivating a supportive work culture, and recognizing and rewarding hard work.
12. Progress toward goals and deadlines
Evaluating progress toward set goals and deadlines reveals how well your business achieves and meets its long-term goals. Key performance indicators (KPIs) and project management tools like Notion are excellent for monitoring these milestones and ensuring you hit predefined goals. By understanding where you stand, you can pivot operations, optimize resource allocation, and roll out action plans clearly. This also ensures everyone knows their roles and expectations. When everyone works in a structured system with clear objectives, you’re likelier to achieve KPIs and long-term success.
Optimize your business for success
Measuring and analyzing these recommended business performance metrics help you make informed decisions, discover opportunities, and approach challenges proactively. With the right resources, you can guide your company to long-term success.
Whether you’re a solopreneur, at an established company, or running an ecommerce store, data-driven methodologies let you harness each metric effectively to drive business growth.
To get more insights into your business’s performance, explore Webflow’s resources. Webflow Enterprise offers powerful tools to create websites with visual web development. Or check out our blog for more website maintenance and optimization guides that can help you measure and optimize website performance.