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Unlocking Success: 7 Common Key Performance Indicators for Small Businesses

by | Sep 15, 2023 | Business Tips

Running a small business is like sailing a ship in uncharted waters. To ensure you’re on the right course and headed towards success, you need a compass. In the world of business, that compass is known as Key Performance Indicators (KPIs). KPIs are essential metrics that help small business owners gauge their performance and make informed decisions. In this blog post, we’ll explore some common KPIs that every small business should consider tracking.

 1. Sales Revenue

Let’s start with the most obvious KPI – sales revenue. It’s the lifeblood of your business. Track your revenue on a monthly, quarterly, and yearly basis to identify growth trends and seasonal variations. If you see revenue declining, it’s time to investigate and make necessary adjustments.

2. Customer Acquisition Cost (CAC)

Your CAC tells you how much it costs to acquire a new customer. Knowing this figure can help you determine the efficiency of your marketing and sales efforts. If your CAC is too high, it might be time to refine your marketing strategy or find ways to retain existing customers.

3. Customer Lifetime Value (CLV)

CLV represents the total revenue you can expect from a customer throughout their relationship with your business. A high CLV relative to your CAC means your business is on the right track. It’s crucial to focus on retaining and nurturing your existing customer base.

4. Gross Profit Margin

This KPI reveals how efficiently your business generates profit from its products or services. Monitoring your gross profit margin helps you understand your pricing strategy and cost management. A declining margin may indicate the need to renegotiate supplier contracts or optimize production processes.

5. Customer Satisfaction (CSAT) and Net Promoter Score (NPS)

Happy customers are more likely to become repeat customers and recommend your business to others. Regularly survey your customers to gauge their satisfaction and ask the all-important NPS question: “How likely are you to recommend us to a friend or colleague?” High scores mean your business is doing something right.

6. Cash Flow

Cash flow is the lifeblood of small businesses. It’s not just about making money but also having enough liquid assets to cover expenses, pay bills, and invest in growth. Regularly monitor your cash flow statement to ensure your business stays financially healthy.

7. Labor Margin

Labor Margin, also known as the Labor Cost Margin, measures the profitability of a business by comparing the revenue generated from products or services to the labor costs incurred in delivering them.

Tracking these common KPIs in your small business can be a game-changer. It’s like having a dashboard for your business performance, allowing you to make data-driven decisions that can lead to growth and success. Remember, the specific KPIs you need to focus on may vary depending on your industry and business model.

We track Gross Profit Margin, Net Profit Margin, and Labor Margins (if applicable) for all of our clients, but our specialized software allows us to create custom formulas for any KPI we want to track.  And with our Growth and Premium packages you get even more insights with our Deep Dive Strategy Sessions.  So, if you’re getting serious about growing your business or just want to understand your numbers better.  Consider scheduling a discovery call with us today to learn more!

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