26 JUN 2019, autor: Jakub Wierusz

15 key metrics for your business

If You Can't Measure It, You Can't Improve It (William Thomson, lord Kelvin). If you run a business, you should measure the effects of your actions. Only thanks to this you will know whether the invested money and time bring the intended effect. What's more, only this way you will know if the actions you are undertaking need to be improved.

Check 15 key metrics for your business.

Revenues

In our opinion, revenue is the first metric that you should observe. It tells you how much money your company generates in a given time period. If you sell more than one product (or service), you should track revenues for each of the products you offer. Thanks to this you will know if individual product lines are profitable. If you additionally collect and measure data cyclically (eg. monthly), you will know if your business is growing.

Interpretation: The higher metric value, the better.

Net profit

Net profit is the amount of money left to you after deducting costs and taxes. This value determines how quickly your company can grow and whether it will have the funds to invest or pay dividends.

Profit = Revenues - Costs - Taxes

Interpretation: The higher metric value, the better.

EBITDA

EBITDA (Earnings Before Interest Taxation Depreciation Amortization) is the operating profit before interest on interest-bearing liabilities (credits, bonds), taxes, depreciation of fixed assets (Depreciation) and amortization of intangible assets (Amortization). The advantage of the metric is that it eliminates factors that depend on a given legal and tax system or form of financing. This way it enables a better comparison of profitability with other companies than Net profit.

Interpretation: The higher metric value, the better.

Gross margin

Gross margin is the amount of money you have left after deducting the cost associated with obtaining income.

Gross margin = Revenues - Costs

Interpretation: The higher metric value, the better.

NPS (Net Promoter Score)

Customer loyalty indicator. NPS has gained great popularity as an alternative to traditional satisfaction surveys. In contrast to satisfaction surveys, the customer is not asked about his / her satisfaction with a given service, but about the tendency to recommend the service. It is usually measured using online or SMS surveys.

NPS = %Promotors - %Detectors

Interpretation: The higher metric value, the better. Metric ranges from -100 to 100.

eNPS (employee Net Promoter Score)

Don't forget about what is most important for each company, about employees. NPS is not only suitable for customer loyalty, but also for employee loyalty surveys.

eNPS = %Promotors - %Detectors

Interpretation: The higher metric value, the better. Metric ranges from -100 to 100.

Gross Adds, GA

The metric tells you how many customers you have acquired in a given period of time.

Interpretation: The higher metric value, the better.

Net Adds

The metric tells you how many customers, that you have acquired in a given period of time, stayed with you. You get it by reducing Gross Adds by Churn.

Net Adds = Gross Adds - Churn

Interpretation: The higher metric value, the better.

Churn

Tells you how many customers resigned from your services in a given period of time. Churn can be commercial (customers who have left you) or debt related (customers who have stopped paying the subscription). It is extremely important to understand the nature and root causes of churn. Only this way you can act and reduce it.

Interpretation: The lower metric value, the better.

Cost

Revenue is just one page of evaluating your business. The other side is the cost. Only by taking care of both sides can you succeed.

Interpretation: The lower metric value, the better.

Customer Acquisition Cost, CAC

It's the cost you have to pay to get a new customer. The value includes all costs required to convince the customer to make the first purchase. These may include the costs of marketing campaigns, advertising or sales commissions.

Interpretation: The lower metric value, the better.

Customer base

The size of the customer base. This is an important metric especially for all businesses based on payments in the subscription model.

Interpretation: The higher metric value, the better.

Customer Lifetime Value, CLV

The metric changes the way we look at the customer. It tells you what is the total revenues value of the average customer.

CLV = Avg. customer revenue x Avg. customer's life - Costs of customer acquisition

Interpretation: The higher metric value, the better.

Unique users, UU

No matter what business you are in, your customers use the Internet every day. Unique users tell you how many people have visited your website. It is a good indicator if traffic on your website is growing or declining. It is also very useful to track the efficiency of your promotions and marketing activities. 

Interpretation: The higher metric value, the better.

Conversion rate, CR

The metric informs what percentage of your users after registering in the service performed some action eg. activated the account, purchased a service, or subscribed to the newsletter. In the case of internet advertising, it informs what percentage of customers who clicked on the advertisement then bought, registered or carried out some other action.

CR = (number of people converting / number of people who registered on the site) x 100%

Interpretation: The higher metric value, the better. Metric ranges ​​from 0 to 100%.

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