Know These Key Performance Indicators (KPIs) for Your Small Business


Key Performance Indicators (KPIs) are measuring tools that small business owners use to keep track of the progress in terms of profit and business growth. They let the entrepreneur know what they are doing right/wrong by showing the company’s health. These are the most crucial KPIs for small businesses that need to be monitored for ensuring constant growth.

Market share
Market share is a crucial financial KPI for small business. It shows how much control you have on the market. Knowing how well your company is doing relative to firms offering similar products, is crucial for sustainable growth. This is because you can adjust your strategy based on the competition to gain an edge.

Net profit
Net profit can be arrived at by subtracting your expenses from your revenue. It is one of the main business key performance indicators. Tracking it constantly every year tells you whether your business is profitable or not and by how much as well.

Net profit margin
The profit margin can be found by dividing net profit by revenue. For instance, if $10,000 was the revenue for the year and $4,000 was the net profit, then your profit margin is 40 percent, implying that you keep $0.40 for every dollar your company makes. Monitoring this KPI every year is essential because it tells you how efficiently you are using your revenue to generate profit.

Customer Acquisition Cost/ CAC
This indicator tells you how much you spend on getting a customer through your marketing efforts. CAC is a particularly important small business marketing KPI for internet-based companies. It gives them an insight into how to improve their marketing efforts.

Funnel analysis
In the age of the internet, small businesses have largely moved online for boosting revenue. This process measures the number of visitors who left a conversion without completing it. It helps you identify the reason that made a prospective buyer drop out of the conversation. Knowing these details can help you develop better sales strategies.

Quick ratio
Since cash flow is essential to prevent a small business from failing, you have to ask yourself this question frequently: Do I have enough money to cover my liabilities? To know the answer, add cash, marketable securities, and the amounts that you expect to arrive soon, and divide the sum by liabilities. Notably, a higher quick ratio signifies a healthy business that can take care of its present liabilities.

A customer’s lifetime value
This KPI tells you how much is a customer worth. You need this because it gives you an idea of how much to spend on sales/ marketing. Finding how much a customer is worth, and keeping your sales/marketing costs significantly lower, is a winning strategy.

If you work with clients on a retainer basis, you can determine this KPI by multiplying the average number of months a client has worked with you by their average retainer price.

If your collaboration is on a project-basis, finding the average number of projects you work on with them per month, and the costs involved will give you an insight into the client’s average lifetime value.

The bottom-line
Tracking of these KPIs can go a long way in keeping your business healthy while providing with the insights needed for further growth. Monitoring these KPIs does not have to be a cumbersome process. Knowing the most relevant KPIs for your business and using the right tools for applications such as business expense tracking can help you make informed decisions that drive business growth.