Companies can improve their profitability in three ways: generate more revenue for a given cost, generate the same revenue for a lower cost or both. All methods require measuring and tracking operational performance meticulously — and that cannot be done without business metrics.

The right business metrics will not only help you achieve your business goals, but will also identify areas that are meeting (or exceeding) expectations while pinpointing those that are falling short. It’s all about allocating your resources wisely and strategically.

What Are Business Metrics?

Business metrics are quantifiable measures used to track business processes to judge the performance level of your business. There are hundreds of these metrics because there are so many different kinds of businesses, with many different processes.

Generally, individual divisions or departments within a company, such as manufacturing, marketing and sales, are responsible for monitoring the metrics that track the performance of their parts of the business. Senior executives track more general metrics. CFOs, for instance, track earnings before interest, taxes, depreciation and amortization (EBITDA), a universal measure of profitability, and the metrics that feed into it, such as net sales, operating expenses and operating profit. The CFO dashboard pictured below provides a high-level view of a company’s financial performance.

cfo dashboard

The COO of a manufacturing company, meanwhile, might want to track the perfect order rate, a key performance indicator (KPI) to measure the performance of warehouse operations. CEOs are likely to closely monitor just a handful of summary metrics drawn from the dashboards of each of their direct reports.

Key Takeaways

  • Tracking the right business metrics is vital to improving company performance.
  • With so many possible business metrics, it’s important to choose the ones that matter most to your business.
  • Every business should track its performance in sales, marketing, finance and human resources (HR) in order to know how it is doing and how it might improve performance.

Benefits of Tracking Business Metrics

Tracking the metrics that are most important to your business — and managing operations based on the results — maximizes the business’s chances of success. It’s that simple. And that hard. The key word here is “important.” For instance, executive search professionals might track how many candidates they bring to a client. But what matters to the client is the speed with which the position is filled and the quality of the candidates; those are the important metrics to measure and track.

Here are six key benefits of tracking business metrics that matter:

  1. Performance improvement: Tracking the right business metrics tells you how well or poorly the business is doing and provides direction for how to improve operations.

  2. Comparative analysis: Tracking business metrics reveals whether the business is over- or underperforming on key industry benchmarks.

  3. Alignment: Business metrics can be used to ensure the entire company is working toward shared organizational goals.

  4. Compliance: Mandates to track certain business metrics from governmental and other regulatory agencies require companies to monitor them to stay in compliance.

  5. Communication: Reporting business metrics is a vital communications tool for customers, shareholders, employees or society at large.

  6. Identifying problems: Analyzing business metrics can help identify emerging problems in time to correct them before they become major pain points.

What Business Metrics Should You Use?

This is a vital question because there are so many business metrics to choose from. In the absence of clarity around business goals, some organizations can go “metrics-crazy” and try to monitor too many things. While every business is different and, therefore, the metrics that matter are different for each of them, these four questions can be powerful tools to identify what matters most to any business:

  • Is the metric directly relevant to the performance of the business?
  • Does it help predict future performance in a useful way?
  • Can it be reasonably measured?
  • Can the business team associated with the metric impact it — and are they authorized to do so?

35 Key Business Metrics to Track in 2021

Step one is to identify the most important KPIs for your business. Step two is to go ahead and track these KPIs. There are several basic KPIs that are important, if not required, for every business.

Sales Metrics to Track

Sales metrics measure and evaluate the sales-related performance and activities of an individual, team or company over a given period of time (for example, weekly, quarterly or annually). Analyzing sales metrics helps identify what is and isn’t working and provides insights into actions to take to improve sales performance. Here are a few key metrics to track in sales.

  1. Net sales revenue: Revenue is the lifeblood of any company; it factors into every aspect of business development, especially sales. Depending on the size and maturity of your business, you may want to track several types of sales revenue metrics. Examples include annual recurring revenue (e.g., from multiyear contracts), average revenue generated per user or customer, revenue by product or product line, revenue by territory or market and revenue generated per sales rep. Formulas for each of these and more are available in our sales metrics guide. But above all, be sure to track net sales revenue. The formula for calculating net sales is:

    Net sales = Gross sales - Discounts - Returns - Costs associated with discounts and returns

  2. Quota attainment: Likewise, there are many metrics oriented around sales goals, but quota attainment may be the most universal. Are you looking to increase the number of reps reaching 100% of their quotas? Start by learning how many already have. Results can show you where to concentrate your efforts. Are you considering whether to ramp up sales in specific regions or markets? You can monitor these targets by measuring their performance against quota. The formula is:

    Quota attainment = Amount of sales achieved by a particular rep or region / Goal for that rep or region

    If the goal is $10 million and the rep achieved $9 million in sales, they’re at 90% of quota.

  3. Growth rate: Year-over-year growth, which is similarly easy to calculate, is an important overall indicator of the health of your business. When compared to industry benchmarks, it tells you how well or how poorly your sales team is performing compared to the competition. The formula is:

    Sales growth rate = (Current year revenue – Previous year revenue) / Previous year revenue x 100

    If your sales were $12 million this year and $11 million last year, your growth rate is ($12 – $11) / $11 x 100, or 9.09%.

  4. Churn rate: Churn rate is the percentage of customers who cancel or don’t renew their contracts or subscriptions for a company’s services or products. This metric crosses department lines: For sales, it reflects a sales team’s ability to retain customers. For finance, leaders watch churn rates to see the potential impact on a company’s sales and profits. For Software-as-Service (SaaS) businesses, it can mean rising or plummeting subscribers and, hence, revenue. All of these concerns can hit the marketing department, too, which needs to evaluate the channels and campaigns that performed well or fell flat. Rising churn rates could indicate a problem with a company’s offerings or customer service approach, or it could mean the company is losing business to competitors. The formula is:

    Churn rate = Number of customers lost during period / Starting number of customers at beginning of period x 100

    For example, if a company begins Q3 with 5,000 customers and ends Q3 with 4,000 customers, then the difference in the number of customers (1,000) indicates a 20% churn rate.

  5. Lead response: Besides quota attainment, you might want to look into how it takes reps to contact a new lead. Lead response time can be immensely important in certain industries because the quicker a salesperson responds to a person’s inquiry, the more engaged that person is likely to be and the greater chance of a sale. Calculate lead response time as:

    Lead response time = Sum of time between lead contact to sales rep response for all contacts / Total number of leads

    For example, if a sales rep is given 9 leads and responds to 5 leads within 1 day, 3 leads within 2 days and 1 lead in three days, the lead response time is (5 x 1 + 3 x 2 + 1 x 3) / 9 = 1.55 days.

Marketing Metrics to Track

There are so many ways for businesses to market and advertise their product or service — direct mail, email, websites, social media — that it’s essential to know what mix works best. Adopting key marketing metrics helps your marketing team determine how effective its methods and channels are in supporting the success of your business.

  1. Return on marketing investment (ROMI): ROMI is a bit different, and harder to calculate, than most ROI metrics because it focuses on the profits of incremental sales that can be attributed to marketing activity — or more simply, profit generated by the marketing department. It can be calculated separately for every marketing or advertising channel. ROMI can provide insights into the value of marketing activities in general or differentiate the relative performance of different marketing channels and campaigns. The formula is:

    Return on marketing investment = (Sales growth – Marketing cost) / Marketing Investment x 100

    For example, imagine you invest $10,000 in an email marketing campaign, which generates $60,000 in sales at a 20% margin, thus contributing $12,000 to company profit. Your ROMI for this effort is (60,000 X .20 – 10,000) / 10,000) x 100 = 20%

  2. Cost per lead (CPL): How much does it cost to identify, attract, qualify and retain a customer? Determining how much each lead costs will help you allocate your budget appropriately. But just because a particular channel incurs a higher CPL, doesn’t mean you should drop it: Those customers might actually convert at a higher rate or spend more than customers gained through a lower-CPL channel.

    Cost per lead = Total marketing spend / Number of new leads

  3. Customer acquisition cost (CAC): How much does it cost to turn a prospect into a customer? CAC should take into account all marketing and sales costs, from salaries and benefits of the staff to the media spend. It’s best to calculate CAC for a period of time that covers the peaks and valleys in your business — a year is standard.

    Customer acquisition cost = Total marketing and sales spend / Number of new customers

    If you invest $1 million in marketing and sales and get 500 new customers, your CAC is $1,000,000 / 500 = $2,000 per customer.

  4. Customer lifetime value (CLV): There’s little point knowing what it costs to acquire a customer if you don’t know what that customer’s patronage is worth. CLV is the profit earned from a customer over the entire time they remain a customer. But you don’t want to track the value of an individual customer — you want the average of all customers, or of like customer groups. Note that this is different for some companies, such as those that would add value from customer references or recurring revenue.

    The formula is:

    Customer lifetime value = (Average transaction value x Average number of transactions in a year x Average customer retention in years) x Profit margin

    Suppose a company with an overall 20% profit margin retains customers for five years on average. The company has an average transaction value of $100 and each customer makes 10 purchases per year. Its CLV = (100 x 10 x 5) x .20, or $1,000.

  5. Customer retention: Knowing how costly it is to acquire new customers demonstrates how important it is to retain the customers you already have. Customer retention is the percentage of existing customers that stay during a specific period of time. The formula is:

    Customer retention = (Number of customers at end of a period – Customers added during period) / Number of customers at beginning of period

    For example, if a company had 500 customers at the start of a year, added 50 customers during the year and ended with 500 total customers, it would have a customer retention rate of (500 – 50) / 500, or 90%.

  6. Website traffic-to-lead ratio: A sales qualified lead (SQL) from your website is someone that is not only aware of the company but interested enough to enter information about themselves on the website in order to, for example, get past a filter or to get your newsletter. The formula is:

    Website traffic-to-lead ratio = Number of leads / Number of unique website visitors

    A business whose website is visited by 500,000 individuals in a month, 5,000 of whom convert to leads, has a traffic-to-lead ratio of 1%.

  7. Conversion rate: Conversion rate is a way to measure the percentage of users or customer prospects who complete a desired action, such as making a purchase, registering an account or starting a free trial. Tracking this metric can help you get a feel for how well your marketing strategy is working. The formula is:

    Conversion rate = (Conversions / Total unique visitors) x 100

    For example, suppose a subscription business offers a free trial to 1,000 potential customers in total, and 200 of them take advantage of it. The conversion rate is (200 / 1,000) x 100, or 20%.

  8. Website bounce rate: Like conversion rate, this metric can help you track how effective your marketing strategy is. Bounce rate tracks how well a website landing page generates visitor interest by calculating the percentage of visitors who enter the site and leave before viewing other pages within the same site. The formula is:

    Bounce rate = (Number of site visits that access only one page / Total number of site visits) x 100

    If a site has 100,000 visitors, and 50,000 of them view only one page, it’s bounce rate is (50,000 / 100,000) x 100, or 50%. The higher the bounce rate, the less likely the site engages customer interest. A low bounce rate is ideal.

Financial Metrics to Track

For finance teams, the metrics that matter most are the ones that reflect the financial health of the business. After all, a company’s survival hinges on its financial health. Thus, most financial metrics concern factors like revenue, cash flow, accounts receivables and assets and liabilities — there are many financial metrics to track.

  1. Net income: Also known as the bottom line, net income is generally one of a business’s biggest financial concerns. It’s also an important starting point for calculating other key metrics, like net profit margin and earnings per share. Since it reflects total business expenses subtracted from total revenue, net income generally appears at the bottom line of a company’s income statement. Net income can help assess whether revenue exceeds business expenses and, if so, by how much. The formula is:

    Net income = Total revenue – Cost of goods sold – Operating expenses – Other expenses – Interest – Taxes – Depreciation and Amortization

    Net income is different from gross income, which only subtracts the cost of goods or services sold from revenue.

  2. Net profit margin: One of the most important indicators of a business’s profitability, net profit margin measures how much actual profit is netted for each dollar of revenue made. This is important because revenue increases may not always translate into increased profitability. Before calculating the net profit margin, a business must calculate its net income. The formula for net profit margin is:

    Net profit margin = (Net income / Total revenue) x 100

  3. Gross profit margin: Unlike net profit margin, gross profit margin shows a company’s profits before subtracting interest, taxes and operating expenses like rent, utilities and wages. A healthy gross profit margin plays an important factor in whether a business is able to cover all of its expenses. The formula is:

    Gross profit margin = (Revenue – Cost of goods or services sold) / Revenue

  4. Current ratio: To stay financially fit, a business must be liquid and able to pay off its financial obligations. Current ratio measures a company’s ability to pay off financial obligations that are due within a year and is calculated as the ratio of current assets to current liabilities. Current assets are those expected to convert to cash within a year (such as accounts receivable), while current liabilities are obligations due within a year (such as accounts payable). The formula is:

    Current ratio = Current assets / Current liabilities

    Generally, a current ratio above 1.0 is considered healthy. A ratio of 2.0, for example, suggests the business has two times more current assets than current liabilities. However, a current ratio above 3.0 could indicate the business isn’t efficiently handling working capital. Note that current ratio is only a quick, short-term snapshot of solvency and must be calculated regularly.

  5. Working capital: All businesses need money to meet short-term needs, but having too much cash on hand at any given time means the company is wasting an opportunity to invest in future growth. Keeping a close eye on working capital can help you figure out ways to free up cash, use funds more effectively or learn to reduce dependence on outside funding, while getting a clear sense of the business’s liquidity. The formula is:

    Working capital = Current assets – Current liabilities

  6. Accounts receivable turnover ratio: Businesses must be able to effectively bill and collect payments from their customers or clients. The accounts receivable turnover ratio measures how effectively the accounts receivable department collects debt owed by clients. The higher the ratio, the better the company is at collecting payments, which makes it more likely to have cash on hand to make its own payments or invest in growth. A lower turnover ratio can indicate illiquid customers, slow-to-pay customers or an inefficient debt collection process — potentially stunting a business’s growth. The formula is:

    Accounts receivable turnover ratio = Net credit sales in a given period / Average accounts receivable of period

  7. Percentage of accounts payable overdue: It’s not only important to keep track of accounts receivable; it’s also key to pay close attention to accounts payable. The percent of accounts payable overdue can indicate cash flow problems — the more overdue payments, the more likely the business is having trouble paying suppliers, indicating a need for funding or a new business strategy. The lower the percentage, the better a company is at paying its debts on time.

    Accounts payable overdue rate = (Accounts payable overdue / Total accounts payable) x 100

SaaS Metrics to Track

Many important SaaS metrics overlap with key marketing and sales metrics. For example, churn rate, customer acquisition cost, customer lifetime value and customer retention are all extremely important for SaaS companies, given that the subscription-based business model relies heavily on keeping customers, not just acquiring them. Additional metrics that can provide actionable insights for SaaS companies include:

  1. Monthly recurring revenue (MRR): A key metric for SaaS companies, MRR is essentially a summary of all the revenue you expect to receive in a month. To calculate MRR, simply add up total revenue from paying customers in a given month. However, more complex SaaS businesses generally need to factor in additional MRR calculations. For example, it’s a good practice to calculate the MRR of new acquisitions in a month, as well as “expansion MRR” from existing customers who upgrade their accounts or add new product features and/or users, and “churn MRR” — the monthly revenue lost from downgrades or cancellations. Tracking MRR metrics can help you better understand revenue changes, how well sales teams are doing and whether customers are satisfied or dissatisfied with your service.

    MRR = Total revenue from paying customers in a given month

    If you have 50 customers paying $500/month and 50 customers paying $1,500 a month, your MRR for that month would be (50 x $500) + (50 x $1,500) or $100,000.

    New MRR = Total number of new customers in a month x Revenue brought in by new customers in month

    If you’ve added 50 more customers in a given month, 25 of whom pay $500/month and 25 of whom pay $1,000/month, new MRR for that month would be: (25 x $500) + (25 x $1,000), or $37,500. Gaining new customers is key to revenue growth.

    Expansion MRR = Total number of customers who upgraded in a month x (New revenue – Old revenue)

    If 10 customers upgraded from $500/month plans to $1,000/month plans, your expansion MRR would be $5,000, or 10 x ($1,000 – $500). In other words, you’ve expanded your revenue without having to add new customers.

    Churn MRR = Total number of customers who canceled or downgraded x Lost revenue

    If three customers canceled their $500 subscription and two customers downgraded from a $1,000/month plan to a $500/month plan, your churn MRR equals (3 x $500) + (2 x $500), or $2,500. Significant churn indicates customers may be dissatisfied with your service.

  2. Average revenue per account (ARPA): Also known as annual revenue per unit (ARPU), ARPA measures the average revenue generated by each account, usually on a monthly basis. It’s important to have access to your billing or accounting system in order to accurately calculate ARPA. Tracking ARPA can help give you a sense of how your revenue evolves over time. Some SaaS businesses might track the ARPA of long-term customers and compare it with the ARPA of new customers to see whether new acquisitions have different purchasing preferences, providing insight into how customers use and perceive your product. The formula is:

    ARPA = MRR / Total number of customers in that month

    If your monthly recurring revenue is $100,000 and you have 200 customers, the average revenue per account is ($100,000 / 200), or $500.

  3. Customer engagement score: Customer engagement scores can help you understand how much and how often your customers engage with your SaaS solution, such as how often they log in, how often they use specific tools and features, what they use the software for and more. For example, if a customer regularly uploads files and uses various features throughout the day, they’re far more engaged than a user who simply logs in once a day to check reminders or alerts. By tracking customer engagement, you can better predict customer churn and be proactive about creating solutions to retain valuable customers.

    There’s no one formula to calculate a customer engagement score, so a business must create its own model and system to do so. Create a list of inputs or actions that predict customer engagement, perhaps based on habits of long-term customers. Then score each input or action based on how critical it is to customer retention and add up each customer’s engagement score. Continually evaluate your rating system to ensure you’re appropriately picking the right features that predict retention and churn.

  4. Net Promoter Score (NPS): NPS estimates the likelihood users will recommend your service to others. It’s particularly important for subscription businesses because their financial health depends on retaining as many customers as possible — and, preferably, getting them to upgrade and/or refer the product to colleagues and friends. NPS is usually measured through a one-question survey to customers: “How likely are you to recommend us to a friend or colleague?” with a 0-to-10 scale (where zero means they won’t recommend your product and 10 means they definitely would). Respondents are then bucketed into the following categories:

    • Detractors, or respondents who answer with a 0 to 6.
    • Passives, or respondents who answer with a 7 or 8.
    • Promoters, or respondents who answer with a 9 or 10.

    To calculate:

    NPS = Percentage of promoters – Percentage of detractors

    For example, out of 100 survey respondents, 20 are detractors, 50 are promoters and 30 are passives. Your NPS would be 30 (50% – 20%).

Human Resources Metrics to Track

Human resources metrics can help indicate employee satisfaction and performance. These metrics generally track data related to employee turnover, development and engagement, company culture and training costs — all of which can help you spot workforce trends and dynamics and proactively solve potential issues, like burnout or ineffective training programs. Key HR metrics to track include:

  1. Employee turnover rate: Every company will lose employees from time to time, but the less turnover, the better. High turnover rates can reflect talent management issues, unhappy workers or a pattern of hiring employees unfit for their positions. In general, an average turnover rate between 10% and 20% is little cause for concern, but numbers vary by business and by industry. Turnover rates higher than industry average suggest competitors may be more attractive for employers. Note that turnover can be voluntary or involuntary, and it’s important to measure both to track how often employees leave on their own accord and how often they are let go. Some businesses may also benefit from calculating the turnover rate for high performers.

    Turnover rate = (Number of separations in a given period / Average number of employees in period) x 100

  2. Revenue per employee (R/e): Sometimes regarded as a sales metric, revenue per employee is important in the HR context because it can help you get a read on the productivity of your entire workforce. The more revenue per employee, the more productive a business is and the more likely it’s efficiently using resources — both of which can directly relate to greater profits. However, revenue per employee will differ greatly across industries, so it’s important to only make comparisons with businesses similar to your own. An online bank, for example, might have far fewer staff than a brick-and-mortar bank chain requiring staff at each location. To calculate:

    Revenue per employee = Total revenue / Current number of employees

  3. Employee net promoter score (eNPS): eNPS is an effective measure of employee satisfaction. Like the traditional NPS, eNPS offers a standardized approach to understanding how employees feel about the company, using a scale from 0 to 10. However, eNPS measures the likelihood that an employee would recommend your company as a place to work, or the likelihood they’d recommend your products to family or friends. Again, scores of 0-6 are detractors who are unlikely to recommend, 7-8 are passives and 9-10 are promoters who are highly likely to recommend your company. The formula is:

    eNPS = Percentage of promoters – Percentage of detractors

  4. Training spend per employee: Companies should track training expenses to see whether they’re getting a return on their investment. For example, companies with high turnover ratios may be investing more in training an employee than the revenue that employee generates before they leave the company. Similarly, tracking training expenses alongside employee productivity and profitability can help a business determine whether training strategies are effective. The formula is:

    Training spend per employee = Total training expenses / Total number of employees

  5. Career path ratio: This metric helps track the ratio of vertical promotions to lateral transfers. This is important for both employees and businesses. If companies want to promote long-term job satisfaction, employees generally need room to grow and learn new skills, whether it’s via vertical promotion or applying for a lateral move. For companies, turning inward to find talent can be more cost-effective than recruitment. Tracking career path ratio can help a company measure employee mobility. The formula is:

    Career path ratio = Total promotions / (Total promotions + Total transfers)

    Values above 0.7 indicate more vertical promotions, meaning the organization may be getting too “top heavy” and should look to start expanding roles laterally. Values under 0.2 indicate more lateral transfers, suggesting not enough employees are being primed for promotion.

Other Business Metrics to Track

To provide a sense of the sheer volume of business metrics available, here are a few additional metrics that can be useful for the C-suite, inventory teams, manufacturing companies and other business departments and industries.

  1. Revenue vs. forecast: Executives and other top-level managers can benefit from monitoring metrics that reflect overall business health, such as comparing actual revenue to forecasted revenue. This metric can help executives see whether company performance is matching expectations or coming up short. If actual revenue is falling short of expectations, executives must act to find out what’s causing the disconnect. To quantify the variance, companies can use this formula:

    Variance Percentage = ((Actual – Forecast) / Actual) x 100

  2. Inventory turnover rate: A crucial financial metric for manufacturing and retail companies, inventory turnover rate tracks how many times a company sells and replaces its inventory over a given period. The higher the number the better, because it means the company is holding less inventory — and holding inventory is expensive. A higher number also generally indicates healthy demand. However, if a high inventory turnover rate is accompanied by lost sales due to item unavailability, the company is probably running too lean. The formula is:

    Inventory turnover rate = (Cost of goods sold / Average inventory) x 100

  3. Scrap: Measuring scrap, or waste, is a key metric for manufacturing teams. Specifically, scrap measures the amount of rejected or unusable manufactured items, usually due to manufacturing defects. Scrap can’t be reworked and may not be recyclable. Depending on the materials used to produce an item, scrap can either be measured as volume, weight or individual units. The formula is:

    Scrap = (Total scrap units, volume or weight / Total product run in units, volume or weight) x 100

    The less scrap, the more effective the manufacturing process.

  4. Return on assets (ROA): ROA calculates the per-dollar profit a company makes on its assets and is used to assess profitability. This is a particularly important metric for the banking industry because bank assets largely consist of money that is loaned, making cash flow harder to analyze than other types of businesses. The formula is:

    Return on assets = Net income / Total assets

    The higher the ROA, the more efficient a company is with its assets. However, it’s important to note that bank ROAs generally hover around 1% — which is still considered a healthy number for the industry. This is because banks often have more debt than equity.

  5. Average support ticket resolution time: A key metric for customer service departments, average support ticket resolution time tracks how long it generally takes to resolve support tickets. Although response time is also important, resolution time is a better metric because a short resolution time typically will indicate quick responses as well. Support teams should strive to have fast resolution times in order to keep customers satisfied.

    It’s useful to continually track resolution time metrics in a chart over time. Any spikes can be investigated — perhaps a team member was on vacation, or it took time to patch a software bug.

  6. Customer satisfaction: Like employee satisfaction, customer satisfaction is critical to a successful business. One way to measure customer satisfaction is through a CSAT, or customer satisfaction, scale. These are typically simple questions that follow up on a single customer experience: “On a scale of 1 to 10, how satisfied were you with X experience?” with 1 being extremely unhappy and 10 being extremely happy. Businesses then add up all the scores and divide that figure by number of respondents to arrive at a customer satisfaction value. The higher the number, the more satisfied customers are with the experience. Findings can be used to address potential issues or reinforce effective practices.

Tracking Business Metrics With ERP

As businesses grow, they need to track more and more business metrics to ensure they achieve high performance over the long term. At a certain point, an ERP solution such as NetSuite ERP will play a leading role in helping the organization stay on top of the metrics that are most important. Because ERP systems contain data that spans a company’s core business operations, they make it easier to generate real-time metrics, often through visual dashboard formats tailored to each executive. This empowers teams to track important metrics, absorb their meaning rapidly and intervene, as needed, in real time. For example, by sending an alert when inventory falls below a particular level, a manager can issue a purchase order before a stockout nears, thus proactively improving inventory turnover rate.

Also, by organizing and improving business processes, ERP solutions make it easier for a company to deliver products or services more effectively and efficiently. Improvements of this kind can generate satisfied and loyal customers, which grows the bottom line, the ultimate goal of any business.

Business metrics help companies track such things as revenue growth, average fixed and variable costs, break-even points, cost of selling goods, contribution margin ratio and profits. They provide a means of measuring business or departmental activities or tasks over a given period of time and reflect the ways different departments within a company interact with and affect each other. Choosing the right metrics, and choosing the right number of metrics, is important to the long-term success of any growing business.

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Business Metrics FAQ

What are key metrics in business?

Key metrics in business are the numbers you track to make sure your business is doing as well as it can. They help businesses achieve goals and determine where improvement is needed.

How are metrics used in business?

Business metrics help companies track things such as revenue growth, average fixed and variable costs, break-even points, cost of selling goods, contribution margin ratio and profits. They provide a means of measuring business or departmental functions over a given period of time and reflect the ways different departments within a company interact with and affect each other.

What are the 5 key performance indicators?

Opinions differ and vary from one business to the next, but many agree that five of the most important KPIs include sales revenue, customer acquisition costs, customer churn, customer engagement and customer satisfaction.

What is an example of a business-related measurement?

Examples of business-related measurements include metrics like sales quota attainment or net profit margin. Sales quota attainment measures whether salespeople are meeting their sales quotas, which can directly affect a business’s bottom line. Net profit margin measures how much actual profit each dollar of revenue yields, which is particularly important because revenue increases may not always translate into increased profitability.