10 Key Business Metrics Every Company Should Track

10 Key Business Metrics Every Company Should Track

Post Summary.

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  1. The number of active users
  2. The number of new customers
  3. The click-through rate (CTR)
  4. The return on investment (ROI)
  5.  The conversion rate
  6. The average order value (AOV)
  7. The average time between visits (TTV)
  8. The average lifetime value (ALTV)
  9. The churn rate (CR)
  10. The revenue per employee (RPE)
  11. Conclusion

There are many metrics, in other words, key performance indicators to determine how successful your business is; however, there is a risk of misinterpreting which of them are indeed essential and, as a result, would waste a lot of both human and financial resources on tracking completely useless metrics. Researchers at MentorcliQ suggest that working with a limited number of key metrics will allow you to analyze how effective your company is at the moment and identify the most crucial issues that need to be dealt with in the first place. If you want to improve your business, you will find a list of the critical business metrics you should track to take your business to the next level below.

The number of active users

This metric allows you to evaluate how many people regularly use your product or service. It is essential to track if your business is subscription-based and/or has an advertising model. Let’s say you are launching a new app and tracking how many people are using it weekly. You can use the Google Analytics event tracking feature to send a conversion event to Google Analytics each time a user clicks on any button in your app. This will allow you to track how many users have clicked on any button in the app.

The number of new customers

This metric is critical for businesses that rely on new customer acquisition to generate revenue. The higher this number is, the more profitable these businesses are. The number of new customers is usually calculated as the percentage of visitors who eventually became customers (the conversion rate). This metric is critical when you are evaluating how effective different marketing channels are.

The click-through rate (CTR)

CTR shows how many times people have clicked on your paid search ads compared to the total number of times your ad was displayed. For instance, if you were paying $10 per 1,000 impressions, and your CTR was 2%, you would be paying $10 for 200 clicks ($10 / 1000 = 0.01 x 200 = $2).

To calculate your own CTR, use the following formula: (clicks / impressions) / 100 = CTR.

Since CTR is a ratio, it means that it equals 100% when all of your ads impressions lead to clicks and 0% when none of them do.

If you want to increase your CTR, you should:

  • Make sure that the headline and description of your ad stand out
  • Adjust your bids so that Google displays your ads as often as possible

The return on investment (ROI)

ROI is one of the most important metrics for businesses that rely on paid advertising channels. By tracking your ROI, you can estimate how much money you have gotten for every dollar you have spent on advertising.

ROI is calculated as follows: (revenue – the cost of goods sold) / cost of goods sold x 100 = ROI %.

 The conversion rate

This metric indicates how successful your sales process is by showing how many visitors are being converted into customers (the opposite from ROI). The higher this number is, the more profitable your business is.

The conversion rate is usually calculated as the percentage of visitors who convert into customers. To calculate it, use the following formula: (customers / visitors) x 100 = conversion rate %.

The average order value (AOV)

AOV shows how much each customer spends on average when ordering from you every time they visit your store or website and then convert into customers (the opposite of the conversion rate). The higher this number is, the more profitable your business is since you are selling more expensive products and services.

The average time between visits (TTV)

TTV indicates how long it takes for a particular customer to make a second purchase after their first one on your website or in your store. If TTV is high, it suggests some problems with your checkout process and/or customer support.

The average lifetime value (ALTV)

ALTV shows how much money a customer will spend over their entire lifetime by purchasing products or services from you over and over again until they stop doing it altogether. This metric allows you to evaluate how profitable your business is at the moment and determine which parts of it should be improved to increase its profitability even further.

The churn rate (CR)

CR represents how many users have stopped using your product or service altogether within a certain period of time, e.g., within 30 days after using it for the first time (the opposite from the conversion rate). The lower this number is, the better since it means that most of your customers come back to use your product or service again after their first purchase from you.

The revenue per employee (RPE)

RPE shows how much money your company generates on average per employee working there (the opposite of the conversion rate). This metric helps you to determine how effective each of your employees is in generating revenue for your company relative to their paychecks; hence, it lets you know whether they are worth keeping or firing at all.

Conclusion

If you have a business or company and are looking for ways to improve it, you should apply these metrics to see where your business is lacking. If you are still unsure about the metrics in this article, you can find additional support here. Using these metrics, you might find a hole where you didn’t think there was one, and by finding it on time, you can fix it.

 

Thank you for reading!

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