Useful performance metrics for business management success

By Shane Conroy

Taking control of the health of your business begins with the right performance metrics.

Performance metrics are essentially a set of quantifiable measures that can be applied across your organization to track the performance of various aspects of your business.

Committing to tracking them regularly over time will reveal powerful new insights into how your business is performing in the real world and what might be holding your business back.

Whether you want to assess the performance of your latest marketing campaign, are looking for new ways to boost your productivity and employee engagement, or need to identify faults in your customer service processes, the right performance metrics will inform your decision-making and ensure you are implementing the right strategies for success.

Here are some useful performance metrics that every business owner should keep front and center.

Cash flow

Cash flow is critical to the health of your business, and a key performance metric that should be constantly tracked. Specifically, compare the number of average days it takes your debtors to pay their accounts against the number of average days you take to pay your creditors. Paying out funds faster than you need to could be compromising your cash flow and causing harmful bottlenecks in your finances.

Sales revenue

Most businesses track sales revenue, however many fail to sufficiently analyze sales data to reveal deeper trends. Your sales revenue equals your total sales less your costs, and should be tracked against advertising and marketing campaigns, new product or service launches, seasonal discounts or any other sales-boosting strategies to determine which achieves the best market result.

Gross margin

To calculate your gross margin, subtract the cost of goods sold from your total sales revenue, then divide that figure by your total sales revenue to arrive at the final gross margin percentage. This figure tells you how much profit you make on each dollar of sales, and is a key metric for measuring your profitability performance. For example, a low gross margin percentage may signal room for improvement in productivity or highlight the need to reduce overhead costs.

Productivity

Tracking productivity metrics will provide key insights into the performance of your people and the effectiveness of your operational processes – both of which are critical to your overall profitability.  To calculate your sales productivity, simply divide your total sales revenue by the number of sales people in your organization. This will give you a quick oversight of your sales productivity performance, but keep in mind that productivity should be measured across all business units. 

Employee engagement

Holding on to your best people remains challenging for many small businesses in an increasingly competitive environment. Use regular employee satisfaction surveys to create an employee satisfaction score that you can track as you implement new staff engagement strategies that address any weak points revealed in your employee surveys. This will help you retain your top talent and cut recruitment and training costs.

Customer satisfaction

Voice of the customer (VoC) metrics offer powerful insights into the expectations of your customers and how you’re delivering on them. VoC metrics employ customer surveys, focus groups, point-of-sale feedback or any other research that reveals how your customers are interacting with your brand. This information will help you to identify any process faults impacting the customer experience, and will assist you in evolving your customer service offering in line with changing customer expectations.

Cost of new customers

Do you know exactly how much it costs you to find new customers? To calculate the cost of customer recruitment over a given period, divide your total marketing and sales costs by the total number of new customers. Compare this score to industry standards to assess your performance, and track it over time to rate the success of any sales and marketing optimization strategies you implement.

Commit to regularly tracking these performance metrics over time and you’ll soon have a powerful set of tools to keep your business on the road to success.