It’s impossible to grow without the facts. Learn what essential business data you need to be tracking and how to do it.
- Eight most important KPIs for small businesses:
- Customer acquisition cost
- Conversion rate
- Employee retention rate
- Operating cash flow
- Net income
- Website traffic
- Social media engagement
- Tools for tracking these KPIs include social platforms, Google Analytics, and financial software.
A key performance indicator (KPI) is not a number that exists in a vacuum. It’s a metric that tells you how your business is specifically performing against goals and objectives. It measures success and helps you predict the future. KPIs reveal the health of a business so that owners can pivot when necessary.
Without these metrics, businesses can’t know if their strategies are working. KPIs can be linked to the organization as a whole, specific departments, or individuals within the company to determine weak spots, helping business leaders make better decisions and set better goals next time. They also show real-time information about a campaign’s effectiveness or interactions with customers.
So, what small business KPIs should you be tracking?
8 most important KPIs to track
Every business is different, and the KPIs that are prioritized against current goals will vary from company to company. To start, make sure that all of your objectives are measurable and you know the specific timeline you want to assess. Also, remember that not all crucial KPIs will be strictly related to finances; they may also involve marketing campaigns or customer engagement.
Let’s take a look at the most important KPIs that most small businesses generally need to start tracking:
1. Customer acquisition cost
You should know how much it costs to obtain a new customer. Determine every expense that goes into getting a new sale and divide the sum by the number of new customers acquired. You also need to know the exact period you’re measuring. This is an essential KPI because it helps you understand if sales and marketing tactics are working and are worth all the cost and effort.
2. Conversion rate
Getting people to convert is an integral part of growing a business, and conversion rate is a crucial marketing KPI. It tells you how successful you are at getting people to take the action you want them to take, whether it’s buying something, signing up for a newsletter, or submitting their lead information. Measure conversion rate by taking total conversions and dividing it by total visitors or prospects.
3. Employee retention rate
If you have employees, it’s vital to track how frequently people leave. The employee retention rate can tell you whether you have a healthy culture, an appropriate workload, or issues that must be dealt with to keep workers satisfied and engaged. Simply divide the number of employees that stayed during a specific period by the number you had on the first day of that period.
4. Operating cash flow
You need to know if you’re going to generate enough revenue to pay all expenses and have some left to grow operations. This measurement is operating cash flow, and you can calculate it by adding operating income and depreciation and then subtracting taxes and changes in working capital.
5. Net income
Net income is how much money you have after paying all expenses. This is your net profit, the money you have when all is said and done. Of course, you always want this number to be high, but if it fluctuates, you can discover what may be causing profit losses. Net income is simple: subtract expenses from revenue.
6. Website traffic
Most small businesses now have a website, so it’s simple to find them online, or they offer an e-commerce option. If you have a website, it’s important to put a process in place to track the traffic numbers. Using website tools like WordPress and Google Analytics gives you instant access to stats like these, and you can see your visitor numbers on a daily, weekly, monthly, and annual basis.
7. Social media engagement
You also may be trying to build up a social media following for your business. Social is a cost-effective way to reach people, and 71% of small- to mid-sized businesses use these platforms in their marketing strategy. Social metrics to track include engagement numbers for each post, follower count, impressions, clicks, likes, shares, comments, reach, and more. Opening a business account on Facebook, Instagram, or Twitter grants access to these analytics.
One KPI that is too easy for businesses to overlook is accountability. What does this mean, exactly? Your team needs to be held accountable so that tasks are getting done and roles are clear. An accountability chart implemented under the Entrepreneurial Operating System® (EOS®) helps you outline what needs to be done, who will do it, and how that person or team will be held accountable. The Traction component of the EOS is concerned with ensuring discipline and accountability exist, so you become better at executing actions that help you reach your goals.
Tools for tracking KPIs
Knowing what to track is just the first step. How do you start monitoring and learning from data?
Again, for platforms like social media and your website, you can use built-in tools for businesses that tell you data like engagement, conversions, clicks, and interactions.
For financial KPIs, consider using cloud-based accounting software that enables you to view the numbers in a simple dashboard whenever you log in. You can decide which metrics you want to track at a given time and run reports. QuickBooks is one example of software that helps business owners keep tabs on essential financial data.
Provident CPA and Business Advisors can help you stay on track
Sometimes, all you need is some guidance from experts. Provident CPA & Business Advisors helps small businesses create the right model and stay on track. We use the six components of the EOS to help our clients clarify their goals and achieve their vision while providing essential tax services and strategies.
Contact our team today to learn more.