Business metrics are quantifiable measures used to track business processes and assess your company's level of performance. There are hundreds of these metrics because there are many different types of companies, with many different processes. Next, we'll look at 12 popular business metrics that are reflected in your company's performance and indicate growth or decline. When evaluating your sales revenue and setting goals, it's important to remember that sales results are affected by many other factors.
The person who tracks sales KPIs should also be aware of recent changes in the market, previous marketing campaigns, competitive actions, and so on. Sales revenue is calculated by adding all revenue from customer purchases, minus the cost associated with returned or undeliverable products. The most obvious way to increase your sales revenue is to increase the number of sales. This can be done by expanding your marketing efforts, hiring new sellers, or making discount offers that are hard to resist.
Increasing your sales revenue should be a long-term strategy, rather than a quick (and temporary) increase in sales. The net profit margin is a good way to predict long-term business growth and see if your revenues exceed the costs of running the business. The higher your gross margin, the more your company will earn per dollar of sales. You can invest it in other operations.
This metric is especially important for emerging companies, as it is reflected in the improvement of processes and production. It's like the equivalent of your company's productivity, translated into numbers. Who wouldn't want to see their business grow month after month? But sometimes, the sales depend largely on the season and on the mood of the customers. Sales growth so far this year indicates the rate at which your company's sales revenue is rising or falling.
CE %3D number of customers at the end of a given time period (1 year, for example) CN %3D number of new customers acquired during the same time period CS %3D Number of customers at the beginning of the period See the full list of more than 35 digital marketing KPIs. Every company has goals and milestones. Maybe you want to double your sales revenue for the next quarter, or maybe you're planning to launch a new product. All of these big goals are actually projects that can be divided into milestones to mark your progress.
Improve your work productivity with business management software. See the full list of more than 30 team collaboration tools. While there are many more important business metrics that companies can and should measure, these 12 will provide you with a quick overview of the current state of your business. Explore the product and try Scoro free for 14 days, no credit card required.
Get a 14-day free trial and see how Scoro can work for your company. Business metrics can also be classified as performance metrics, which measure the different aspects of the performance of an organization or project. Financial metrics include aspects of financial performance that track sales turnover, profits, expenses, assets, liabilities, and capital. They are used by organizations in various industries to track business processes, improve operational efficiency, and assist in planning and formulating strategies.
The net profit margin is another indicator of profitability to measure how each dollar of income generates net profits. If there is a low margin, sales prices need to be adjusted upwards or costs need to be reduced. Net cash flow is a measure of the difference between cash inflows and outflows. Cash flow needs depend on the type of business.
Working capital demonstrates a company's ability to meet its short-term obligations. It's basically the ability to make payments to cover short-term obligations with short-term assets. The ratio measures the composition of debt and equity in a corporate capital structure. A ratio greater than 1 indicates that most of the capital comes from debt.
The ratio indicates the risks inherent to the capital structure. The current ratio measures the company's liquidity status, that is, its ability to meet short-term obligations as they mature. The desirable ratios depend on the industry standard, but a ratio greater than 1 is a benchmark for the entire economy. Listen to the world's most downloaded B2B sales podcast Revenue is the amount of sales you generate by selling your product minus the cost of returned or undeliverable items.
It is the key metric that all companies use to measure their financial performance. Obviously, the ideal is to earn as much revenue as possible, but the metric that is most indicative of your company's financial performance is year-on-year revenue growth. You should also remember that your company's situation is completely different from that of your competitors, even though you compete for the same customers. Therefore, it is better to compete against yourself and compare your current income and revenue growth with your previous financial performance than to compare them to those of your competitors.
Otherwise, you could set a revenue or revenue growth goal that is not attainable in your particular context, which would cause you to fail to meet your goals, pressure your employees to reduce expenses to reach their numbers and, ultimately, exhaust everyone. However, to truly understand how they individually affect your results, it's best to calculate each of your product's contribution margin ratios. To do this, subtract the total variable costs of each product from your total sales revenue and divide that number by your total sales revenue. Your contribution margin ratio will be expressed as a percentage.
Once you know the contribution margin ratios of each product and, in turn, its profit potential, you will understand which products will generate the most total profits if you produce more units of them and which products will generate the least total benefits if you produce more units of them. This knowledge will help you develop a combination of products capable of generating the highest level of benefits for your business. Your company's break-even point is the amount of product you must sell in order for your total revenues to equal your total costs. Knowing your break-even point is crucial because it serves as the minimum goal that your company should try to achieve in order not to lose money over a specific period of time.
Even better, if you exceed your break-even point, your company will make a profit during that time period. To calculate your break-even point, add up all your fixed costs and divide them by your contribution margin or the difference between your total sales revenue and total variable costs. The cost of goods sold in your company is the cost of acquiring or manufacturing the products you sold over a given period of time, such as material, manufacturing and labor costs. In other words, they are your cost of sales or the cost of doing business.
Tracking the cost of goods sold, or COGS, is important because they directly affect your company's bottom line. For example, when your COGS increases, your benefit will decrease, and when your COGS decreases, your benefit will increase. A business metric is a quantifiable measure used to track and evaluate the status or performance of a specific business function. Metrics are used to measure progress toward short- and long-term goals and objectives.
Tracking variable costs allows you to manage the production costs of your offerings and increase production as your business evolves. You can use customer lifetime value to assess whether any underlying metrics, such as purchase frequency or customer lifespan, are increasing. The MRR, a key metric for SaaS companies, is essentially a summary of all the revenue you expect to receive in a month. Similarly, there are many metrics aimed at sales objectives, but compliance with quotas may be the most universal.
Year-on-year growth, which is just as easy to calculate, is an important overall indicator of your company's health. Social media metrics track performance and engagement on platforms such as Twitter, Instagram, TikTok or Facebook. In fact, that company's revenues remained stable for consecutive years, a warning about the importance of the turnover metric. Business metrics, also referred to as KPIs (Key Performance Indicators), show a measurable value that shows the progress of a company's business objectives.
This business metric indicates how efficient your company is at generating profits compared to its revenues. The analysis of sales metrics helps identify what is working and what is not working and provides information on what steps should be taken to improve sales performance. Because it reflects total business expenses subtracted from total revenues, net revenues generally appear on the bottom line of the company's income statement. The CRM and business process management provider, looking to grow, introduced new features for business users and the service.
For example, let's say a subscription company offers a free trial to 1,000 potential customers in total, and 200 of them take advantage of it. Metric-based decision-making puts you in a better position to choose options that promote the health and well-being of your company and your customers, since they rely on data and facts rather than opinions. Human resources (HR) metrics are essential to understanding the organization's effectiveness in hiring and retaining employees. While it has value, measuring page views alone is not a KPI because it is not directly related to achieving a strategic business outcome.
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