13 essential and informative metrics every small business needs to track

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13 essential and informative metrics every small business needs to track

When you’re running a small business, you have to keep an eye on sales figures at all times. Zeroing in on sales figures is natural (and important), but sales metrics aren’t the only ones you should be focused on.

The Business Journals

There are several other metrics that will help you reach new customers and grow your business — if you know what they are and what to do about the data you receive from them. Below, 13 members of Business Journals Leadership Trust share the metrics that every small business needs to track and why they’re essential.

1. ‘Growth of wallet’
We like to look at “growth of wallet.” It’s great to get new customers, and it’s great when they return. But, when they return, are they spending more? Do they love us enough to order more next time? If current customers spend more, they’re more likely to recommend you to others and help drive both your top and bottom lines. – Sam Davidson, Batch

2. Churn rate
Churn rate is one metric that should not be overlooked by small businesses (or any business). Churn rate refers to the number of individuals or businesses that stop using your product and/or service. Monitoring churn rate is important because the cost of acquisition for a new customer is much higher than retaining an existing customer. A high churn rate can greatly reduce profits. – Matthew Halle, Lead2Growth

3. Resource utilization
In the IT space, we also track resource utilization. When running a help desk, it is important to understand the volume of work each employee is able to complete. These KPIs are easy to track and give feedback to our executive team regarding which employees are the most productive as well as which employees we need to work with to ensure they can continue to improve. – Jared Knisley, Fizen Technology

4. Outcomes of provided service
Look at the outcomes of the service that is provided. Small businesses need better service to stand out. In health care, outcomes need to be measured to ensure that the service being provided is effective. If the service that is being provided is working and working well, then the customers will have their needs met. – Mackenzie Toland, A New Leaf Therapeutic Services PLLC

5. Employee retention
It’s critical to keep a finger on the pulse of your team. What are morale and retention like? Great compensation packages, recognition, professional development and other incentives are key to building a dedicated workforce to support your business so you can focus on sales. If sales are up but you’re pumping time, sweat and energy into training new members, there will always be disruption to your growth. – Jonathan Ehrenfeld, Blue Ocean

6. Expenses
Sales metrics are important, but they are only part of the story. Small businesses need to focus on margins, expenses as a percentage of revenue and cash flow. Early on, cash flow is going to be critical, and as you mature, you will need to focus on expenses and how those compare to revenue. A big trap is when sales increase, but expenses do as well. The goal is to make sure expenses grow at a slower rate than sales. – Zane Stevens, Protea Financial

7. Customer retention
High customer retention is a metric that signals that a company is a high performer and that competitors will have a difficult time stealing its market share. Some ways a high retention rate is accomplished are through product differentiation, unique value proposition(s) and best-in-class customer experience. Beyond retention is growth, but growth without having retention strategies in place may be self-defeating. – Mark Zinman, Zinman & Company

8. Overhead
While sales and revenue are critical, overhead costs are just as important. You must know these figures to ensure that your revenue covers the daily cost of doing business and that your small business can continue its daily operations successfully. – Jessica Hawthorne-Castro, Hawthorne Advertising

9. Cost of providing service
Keep an eye on the cost of offering your service! It is really easy to lose sight of how much money you are spending not to keep the lights on but to actually deliver your service. Monthly audits will help keep this in check so that when you find a great way to boost sales, you have the budget to spend to make it happen. – Christopher Tompkins, The Go! Agency

10. Sources of new business
Monitor where your new business is coming from. If the idea is to grow your business, you need to know where your incoming leads are coming from. This also helps you manage your advertising spend. Track how your customers are finding you and invest your ad spend in those high-converting areas. If you don’t track where your inbound customers are coming from, you’re probably wasting your ad dollars. – Brandan Davies, Roth Davies LLC

11. Customer response to your services
Ensure you are providing ideal solutions to customer problems. Is the solution you are providing standing out from the crowd and innovative for your prospects and clients? If that is the case, sales, revenue and overhead will cover themselves. You are providing value through service, which is a key metric for ultimate success. – Rachel Namoff, Arapaho Asset Management

12. Margins
I advise my clients, especially small businesses, to focus on “margins” — that is, the bottom line, or what they take home after all the hard work they and their employees have put in. Small businesses have very limited resources. Having a margin perspective helps them pick the right customers and the right markets to assure higher returns, which in turn assures higher valuations of their firms. – Pradeep Anand, Seeta Resources

13. Sales and marketing pipeline insights
I recommend tracking the following four metrics. First, how many months/days of working capital do you have for survival? What are the revenue projections driven by the sales pipeline as measured by profitability (gross margin instead of sales) and probability? How strong is your marketing pipeline, as measured by the leads provided to sales function? What is your speed to cash in days — in other words, how long does the process take from a sale through production, invoicing, collections and, finally, payment for inputs to production? – Dale Gillmore, Quest

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