A business success metric is a quantifiable measurement that business leaders track to see if their strategies are working effectively. Success metrics are also known as key performance indicators (KPIs). When the right metrics are properly tracked, you can use these metrics as a benchmark for how well your business is performing. Here’s a guide to key metrics that provide valuable insights:

1. Revenue metrics:

• Total revenue: The total income generated from sales. It shows your business’s overall earning capacity.

• Revenue growth rate: Measures the percentage increase in revenue over a specific period.

• Example: If revenue was 100,000 last year and 120,000 this year, the growth rate is 20%.

• Average revenue per customer (ARPC): Total revenue divided by the number of customers, indicating customer value.

2. Profit metrics:

• Gross profit margin: Measures the profit after deducting the cost of goods sold (COGS).

• Formula: (Revenue - COGS) ÷ Revenue × 100

• Net profit margin: Shows the percentage of revenue left after all expenses.

• Formula: (Net Profit ÷ Revenue) × 100

• Break-even point: The point where total revenue equals total expenses. It shows when your business starts making a profit.

3. Customer metrics:

• Customer acquisition cost (CAC): The cost of acquiring a new customer, including marketing and sales expenses.

• Formula: Total Marketing Costs ÷ Number of New Customers

• Customer lifetime value (CLV): The total revenue a business expects from a single customer throughout their relationship.

• Customer retention rate: The percentage of customers who stay with your business over a given period.

4. Operational metrics:

• Inventory turnover: The number of times your inventory is sold and replaced over a period.

• Formula: Cost of Goods Sold ÷ Average Inventory

• Employee productivity: Measures output per employee, such as sales made or tasks completed.

• Order fulfilment time: The average time taken to deliver a product or service after an order is placed.

5. Marketing metrics:

• Conversion rate: The percentage of people who complete a desired action, such as making a purchase or signing up for a service.

• Formula: (Number of Conversions ÷ Total Visitors) × 100

• Return on investment (ROI): The return generated from marketing campaigns.

• Formula: (Revenue from Campaign – Campaign Costs) ÷ Campaign Costs × 100

6. Financial health metrics:

• Cash flow: The net amount of cash moving in and out of your business. Positive cash flow ensures liquidity for operations.

• Current ratio: Measures your ability to pay short-term obligations.

• Formula: Current Assets ÷ Current Liabilities

How to use these metrics effectively:

• Set clear goals: Define what success looks like for your business.

• Monitor regularly: Track these metrics consistently to identify trends.

• Adapt and improve: Use data insights to refine strategies and operations.

• Balance your metrics: Combine financial, customer and operational metrics for a complete performance picture.

More likely than not, your team’s work directly contributes to one or more key success metrics. But without a clear way to connect daily work to larger goals, team members can lack clarity on what to prioritise. Understanding and tracking these success metrics helps you and your team stay on course for growth and profitability.