3 Key KPIs to Focus on When Measuring Business Performance

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Measuring business performance often seems like a daunting task, no matter what stage your business is in. KPIs, or key performance indicators, are an integral part of the process. These metrics help you understand the different means of growth for your business, where any gaps are, and what financial streams you can optimise on.

The actual implementation of KPIs vary from business to business, but there are some that remain a central part of business performance across sectors and industries.

Before delving into these specific metrics, it is worth diving deeper into why KPIs are so important. They are crucial for financial growth because they help benchmark what your company is doing well, and where it needs improvement.

In the long-term, these KPIs become strategic points of growth that allow you to solidify revenue streams, and focus on scaling fast without losing momentum. They are measurable aspects of your business that help different teams within your business monitor their own performance. Plus, they can give you a lot of valuable insight when it comes to investing in internal resources for growth. 

So which KPIs are most important for a business? Some of them include:

1) Revenue growth rate

The most important KPI centers around revenue, because . . . well, that is what is driving your business. Essentially, this KPI refers to the rate at which your company's income is increasing. As you continue to try to gain more market share, having this KPI in place gives you better insight into whether your growth is increasing, decreasing, or seeing no change.

This is essential because it allows you to be proactive in trying to stay profitable, rather than reacting to adverse growth and scrambling to stay afloat. 

This KPI is especially important for forecasting and business planning because it will give you realistic measures of revenue. This information can be used to plan future budgets with more accuracy. This should serve as one of the foundations of your KPI strategies because it will dictate how you allocate resources and create budgets.  

2) Cash flow forecast

Cash flow forecasts tend to be particularly important for businesses of all sizes. They are especially useful for smaller businesses getting off the ground.

This KPI allows you to keep your margins at the center of your strategy. This helps ensure maximum profitability. Calculating cash flow forecast is based on the total cash you have in savings for next month and subtracting projected cash out for the next month.

This helps you stay on top of your cash flow, and monitor for any discrepancies before they become bigger issues. Looking to avoid cash flow issues?

 Our previous post can give you some more insight. 

3) Customer acquisition cost

While the first two KPIs focused more on pure finance, there are others you can use to monitor customer growth and retention. Your growth is based on the cost of customer acquisition, but are you sure this is being measured efficiently? If it costs more to bring customers on compared to the revenue they bring in, it quickly becomes a problem.

If your customer acquisition cost is high, it means you are spending a lot on marketing and sales, without seeing a viable return.

The quickest way to calculate this is to divide the total cost of acquisition by the number of new customers in your chosen time frame. And if you see that your customer acquisition cost is starting to skyrocket, you can implement better processes for marketing and sales to bring costs down before it hampers business growth.

This is often an area where businesses have trouble keeping on top of the different indicators. Although they are all incredibly important, it becomes challenging to juggle these business performance measures on top of other responsibilities. Making sense of all this data can be overwhelming, and might end up feeling like an uphill battle. 

If you find this to be the case, why not outsource its measurement, and free up time to focus on other aspects your business? Numbersowl can help your business by identifying and implementing KPIs that position your company for maximum success.

Contact us today to learn more about our services.