Tracking performance is crucial for any organization, big or small, to determine the correct direction of the business. Without key performance indicators (KPIs), it would be difficult to identify areas in need of improvement.
There are a plethora of small business KPIs out there, but which ones should small businesses focus on? This article will cover some essential KPIs that every small business should track.
Small businesses will be able to understand better how they are doing and where improvements need to be made by monitoring these KPIs. So without further ado, let’s get started!
What are Key Performance Indicators (KPIs)?
Key Performance Indicators (KPIs) are measurable values that indicate how well a small business is performing in achieving its goals and objectives. KPIs provide a clear and quantifiable way to track progress and make informed decisions based on data.
The specific KPIs that are relevant to a small business will depend on its goals, industry, and unique circumstances.
Some essential KPIS for small business growth are explained below.
Sales KPIs
Sales KPIs are crucial for any small business because they show whether you’re hitting your revenue goals. Without tracking sales KPIs, it can be difficult to identify problem areas in your sales process and make necessary improvements.
Some key sales KPIs to track include
1. Total revenue: This is the most basic sales KPI, and measures the total amount of money generated by your business through sales.
2. Revenue growth: This KPI measures the year-over-year growth of your total revenue.
3. Average order value: This KPI measures the average amount spent per order.
4. Conversion rate: This KPI measures the percentage of visitors to your website or store who make a purchase.
5. The number of new customers: This KPI measures the number of new customers acquired over a specific period.
6. Customer retention rate: This KPI measures the percentage of customers who continue to do business with you after their first purchase.
You can gain a better knowledge of your company’s sales performance and identify areas that require improvement by monitoring these and other sales KPIs.
Marketing KPIs
Marketing is one of a small business’s most crucial components. After all, it would be incredibly challenging to bring in new clients and expand the firm without efficient marketing. It is essential to track marketing KPIs to evaluate the success of your marketing effort.
Some of the most essential marketing KPIs to track are:
1. Web traffic: This KPI measures the number of visitors to your website. It’s a good idea to track this over time to see if your marketing efforts result in more people visiting your website.
2. Lead conversion rate: This KPI measures how many of your website visitors go on to become leads. A lead is someone who has shown an interest in your product or service by providing their contact information.
3. Sales conversion rate: This KPI measures how many of your leads go on to become customers. In other words, it tracks how effective your marketing efforts are at generating sales.
4. Customer satisfaction: This KPI measures your customers’ satisfaction with your product or service. It’s essential to track this KPI because it can give you an indication of whether or not you need to make changes to your offering.
5. Brand awareness: This KPI measures how well-known and respected your brand is. It’s important to track this KPI over time to see if your marketing efforts are increasing brand awareness.
6. Customer lifetime value: This KPI measures how much revenue a customer will generate over the course of their relationship with your business. It’s important to track this KPI because it can help you focus your marketing efforts on acquiring high-value customers.
7. Social media engagement: This KPI measures the level of engagement you’re getting on social media platforms like Facebook, Twitter, and Instagram. It’s important to track this KPI because it can indicate how well your social media marketing campaigns are performing.
8. Email open rate: This KPI measures the percentage of people who open the emails you send them. It’s important to track this KPI because it can indicate how successful your email marketing campaigns are.
9. Referral rate: This KPI measures how often customers refer new business to you. It’s essential to track this KPI because it can give you an indication of how satisfied your customers are with your product or service
Human Resource KPIs
In any small business, human resource is a crucial department. HR is in charge of not just hiring and onboarding new employees, but also of employee retention and compliance with business rules. As such, it is essential to track a few key HR metrics to gauge your team’s performance.
1. Employee turnover rate: This indicator will tell you how well your team is at retaining employees. A high turnover rate suggests that your staff are dissatisfied with their positions or are not being properly engaged. In any case, addressing the issue is critical in reducing turnover and boosting employee satisfaction.
2. % Of employees who are compliant with company policy: This metric will show you how well your team is doing at ensuring that all employees are following the rules. A high percentage of compliance indicates that your HR team is doing a good job of enforcing company policy.
3. An average number of sick days taken by employees: This indicator will tell you how frequently your employees are absent due to illness and whether or not they are abusing company policy. A high number of sick days suggest that your staff are ill or that they are abusing the system.
Customer Service KPIs
One of the most crucial elements in the success of your small business is the quality of your customer service. After all, happy clients are more likely to recommend your goods and services to others and come back to your firm.
You can track a variety of key performance indicators (KPIs) to get a clear picture of how your customer support staff is functioning. Here are some of the most important ones:
1. Customer satisfaction levels – This can be measured using surveys or customer feedback forms.
2. First contact resolution rate – This measures how often customer queries are resolved during the first contact (e.g. via phone, email, or live chat).
3. Average handle time – This measures the average amount of time it takes for customer queries to be resolved from start to finish.
4. Customer churn rate –This metric estimates the percentage of customers that discontinue utilizing your products or services within a specified time frame.
5. Net Promoter Score – This measures how likely customers are to recommend your products or services to others on a scale of 0-10.
6. Average call waiting time – This measures the average time customers have to wait before their call is answered by a customer service representative.
7. Average speed of answer – This measures the average amount of time it takes for customer service representatives to answer calls from customers.
8. Average after-call work time – This measures the average amount of time customer service representatives spend on post-call work such as completing paperwork or following up with customers after calls.
9. Percentage of calls abandoned – This measures the percentage of calls that customers hang up before speaking to a customer service representative.
IT KPIS
As the world becomes increasingly digitized, so too do small businesses. As a result, IT KPIs (information technology key performance indicators) have become increasingly important for small businesses to track. Here are 9 IT KPIs that every small business should be tracking:
1. Website traffic: This KPI measures the number of visitors to your website. It’s a good indicator of the reach of your digital marketing efforts and can help you identify which marketing channels are most effective.
2. Lead conversion rate: This KPI measures the percentage of website visitors who take a desired action, such as filling out a contact form or subscribing to a newsletter. It’s a good indicator of how effective your website is at converting visitors into leads.
3. Customer churn rate: This KPI measures the percentage of customers who stop doing business with you over a given period. It’s an important indicator of customer satisfaction and can help you identify areas where your business needs improvement.
4. Average order value: This KPI measures the average amount of money spent on each order placed with your business. It’s a good indicator of overall customer spending and can help you identify areas where you could increase prices or offer higher-priced products or services.
5. Net promoter score: This KPI measures customer satisfaction by asking customers how likely they are to recommend your business to others on a scale from 0 to 10. It’s a good way to gauge customer satisfaction and loyalty over time.
6. Social media engagement: This KPI measures the number of likes, comments, and shares your business’ social media posts receive. It’s a good indicator to know customer engagement with your brand and can help you identify the types of content that are most popular with your audience.
Financial KPIs
Key financial indicators (KPIs) should be tracked regularly to ensure your small business is on track financially. Nowadays, accounting software can track essential financial KPIs. Here are 7 essential finance KPIs for small businesses:
1. Revenue: This is the most important financial metric for any business that represents the top-line income generated by your company. Make sure to track total revenue, revenue by product/service, and customer segment.
2. Expenses: It’s not enough to simply track overall expenses, you also need to break them down into categories so you can identify and address areas of excessive spending.
3. Profit Margin: This KPI measures the amount of profit generated per dollar of revenue. A healthy profit margin is essential for any business to sustain long-term growth.
4. Cash Flow: This is a measure of the cash coming in and out of your business each month. Positive cash flow is essential to keep your business running smoothly and avoid financial difficulties down the road.
5. Accounts Receivable: This metric calculates the amount of money owed to your company by customers who have yet to pay their invoices. Make sure to track this metric closely and take steps to ensure customers pay their invoices promptly.
6. Accounts Payable: This measures the amount of money your business owes to suppliers and other creditors. As with accounts receivable, it’s essential to keep this number under control to avoid financial difficulties further down the road.
7. Debt-to-Equity Ratio: This measures the amount of debt financing your business has compared to equity financing (i.e., investment from shareholders). A high debt-to-equity ratio can put your business at risk of financial difficulty if not managed carefully.
Related: Accounting tips for small businesses
Operational KPIs
As a small business owner, it’s crucial to track the performance of your business operations. Here are 9 key performance indicators (KPIs) to help you measure and improve the efficiency of your business:
1. Cost per unit produced: This KPI measures the direct costs associated with producing one unit of your product or service. Tracking this metric can help you identify ways to reduce production costs and increase profitability.
2. Unit production time: This KPI measures the amount of time to produce one unit of your product or service. Tracking this metric identifies bottlenecks in your production process and finds ways to improve efficiency.
3. Order fulfillment time: This KPI measures the amount of time it takes to fulfill an order from start to finish. Tracking this metric can help you identify areas of your fulfillment process that need improvement.
4. Inventory turnover rate: This KPI measures how quickly you sell through your inventory. Tracking this metric can help you optimize your inventory levels and ensure you’re not tying up too much capital in inventory.
5. Percentage of defective products: This KPI tracks the percentage of products that are defective or do not meet quality standards. Tracking this metric can help you identify issues with your manufacturing process and take steps to improve quality control.
6. On-time delivery rate: This KPI tracks the percentage of orders that are delivered on time. Tracking this metric can help you ensure customer satisfaction and avoid costly delays in your supply chain.
7. Employee turnover rate: This KPI tracks the percentage of employees who leave your company within a given period. Tracking this metric can help you identify retention issues and take steps to improve morale and retain top talent.
8. Average handle time: This KPI measures the average amount of time it takes for an employee to complete a task or handle a customer call. Tracking this metric can help you find ways to improve employee productivity and efficiency
Conclusion
There is no single magic number that can tell you whether your small business is doing well or not. Tracking various key performance indicators (KPIs) gives you a fair picture of your business progress and adjustments.
The 9 KPIs discussed in this article are all essential factors to consider when assessing small business performance. Monitoring these KPIs regularly can give you a solid picture of your business performance and areas of improvement.
So, what are you waiting for? Get started tracking these 9 KPIs today and see how your small business is performing!
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