Metrics To Measure Business Performance – Businesses aim to create a successful product or service, sell it and make their customers happy. This can be achieved if the company works in the right direction with persistence. However, many of them struggle to reach the next level of success due to which they do not monitor their business metrics.
To grow a business, you need to make key decisions related to investment, finance, marketing, human resources and business operations, etc. , sales and planning for the future. Many business metrics can be tracked, but the choice of metrics depends on your type of business, your industry, and your business goals.
Metrics To Measure Business Performance
Business metrics are used to track, monitor, and analyze quantitative measures that evaluate the success or failure of a business process. It helps in taking effective business management decisions. It is important to note that business metrics address business stakeholders such as; Customers, managers, business owners, investors and vendors.
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Business metrics give you an overview of the business before diving deeper into key business data.
Each business division tracks, monitors and analyzes their specific performance and key metrics. The sales department will take care of their relevant metrics like sales volume, sales calls, etc. and the marketing team will take care of their relevant metrics like engagement, campaign spend, website traffic, etc. Many businesses and corporations talk about their preferred business metrics in mission statements, and some incorporate them into their workflow.
As I mentioned above, business metrics are directed at stakeholders. It depends on the type of business, industry, business segments and business size. There are too many metrics that can easily confuse you and make your decision more difficult. A best practice is to see which metrics your competitors care about the most. Then create a list and use it for business analysis.
To make your work easier, I have collected the most important business metrics that will help you get started without wasting your time. Each metric listed here has a brief description, formula, and methodology.
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Not all of the metrics listed below need to be used. Use what is important to your business and give a meaningful picture of your business. Let’s dive into business metrics. I have segmented the business metrics based on different segments.
Sales department is the heart of any business as it supplies blood (money) to all other departments. Qualified sales leads are prospects who have shown interest in the product you offer. These leads know your product and will decide whether they buy your product or not.
Qualified Sales Leads (SQL) are typically assigned a value based on their purchase intent. Tracking SQL will help you evaluate the effectiveness of your marketing and give you a quick overview of your product’s marketability.
The exact method for calculating qualified or eligible offers depends on your sales funnel. This metric is a simple count of the number of prospects who have expressed interest in purchasing your product and helps calculate conversion rates.
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Open sales opportunities are qualified leads that your sales team has touched base with or is starting to work with. This metric will tell you the level of productivity of your sales reps and the level of importance they give to each customer.
There is no such figure for this metric, as it depends on the skills and experience of the sales representative. If your sales pipeline does not have the required number of open opportunities, this indicates that your sales team needs to engage with more prospects.
It shows the number of open sales opportunities that your sales team has now closed. This could be due to losing a prospect or winning a sale.
This is a useful measure of how long it takes your sales team to close a prospect and provides insight into the sales department’s progress. Additionally, it will show you the number of prospects your sales rep has interacted with and closed.
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It is the average time it takes for a sales representative, marketing representative, or customer support representative to respond to a lead. This is easy to understand for online businesses, as in this case, it will tell you how long it takes you to respond to website customers.
For example, you run an e-commerce store and a website visitor places a question on your contact form. You responded 15 minutes ahead of time, which means your response lead time is 15 minutes.
The lower the number, the better the response time metric. Josh Harkus, author of A Closing Culture, describes how reducing lead times helped his business increase revenue sixfold and shorten sales cycles.
Sales win rate is the percentage of open opportunities that the business has won. It can be calculated for an entire sales team or an individual sales representative. If you have 200 sales opportunities and your sales team manages to win 50 of them that will give you a 25% win rate.
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You should ensure that you only include prospects to whom you have sent sales proposals and who have not been contacted.
Sales Win Rate = (Number of sales win opportunities / Number of sales opportunities contacted) *100 How to improve sales win rate?
If your sales win rate is low, it means you need to improve your sales message, sales strategy, or your sales reps need training (such as product knowledge and technical team building relationships for sales). This metric is very useful to know about the success of your business and give you an indication if changes are needed.
Remember that your sales profit rate depends on the size of the sales market, the availability of referrals and results. Obviously, closing a large market size takes a lot of time and requires multiple touch points before making a sale.
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This is a good way to get an overview of previous years sales figures. This will show you how your sales are growing every year. This metric will show you a picture of your business growing over the years or suffering a downward trend.
Note: If you want to calculate the sales growth rate in terms of units, convert the current year and previous year values into units sold for each year.
This measure will tell you the average amount of sales made to customers and the amount of effort it will take to break even.
A best practice for using this measure is to segment your customers into large markets, medium markets, and small markets (or as your business needs). This helps avoid bias in deal size and eliminate the impact of excess items.
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Sales Value (Average) = Total Sales Value ($) or Total Segment Sales Value/ Number of Sales (Units) or Segment Sales 8. Sales Cycle:
A sales cycle is the average time it takes to make a profit on a sale. It is measured in terms of time like days, weeks or months. This measure will identify your bottlenecks and tell you which segments in your sales funnel need the most attention. Additionally, the sales cycle can help you identify critical areas in your sales funnel.
Note: Make sure the total time spent on earned sales is the cumulative time spent on all successful sales.
It depends on your business and the industry you work in. This will lead to your continued learning and sales experience before you find your sales cycle.
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Prospects whose average/ideal sales cycle exceeds the average sales cycle are usually harder to convert. This is because they may lose interest in your product or offer and go to your competitors.
This is the most important business metric for your sales team. This is a measure of how likely your customers are to recommend your product or service to others (friends and family).
It generally describes your customers’ overall perception of your brand. Marketing and branding departments also use this metric to help improve their campaigns.
There are various ways to calculate NPS, but the most common way is to calculate it using a customer survey. Surveys ask consumers how likely they are to refer your business, brand or product to their social circle.
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NPS typically uses a scale of 0 to 10, where 10 is likely to be recommended and 0 is not likely to be recommended. You can measure the percentage of people from 0 to 6 as barriers and 7 to 10 as promoters. The difference between the two percentages will give you your Net Promoter Score (NPS).
If your total blockers are 20% and your total promoters are 50%, that means your NPS is 30%. This measure gives you insight into your loyal customers and those willing to spend more.
This one is very important
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