Tracking key performance indicators (KPIs) can be an excellent way to measure the overall health of your business and predict its future successes or failures. From customer satisfaction to the cash conversion cycle, there are numerous metrics business leaders can track that will give them valuable insights into the inner workings of their businesses.
Ensuring you’re paying attention to the right metrics may even save you from making costly mistakes that could be difficult to recover from. With that in mind, the members of Young Entrepreneur Council recommend tracking these 11 KPIs if you want to dive deeper into the data behind your company’s performance.
1. Innovation Rate
While there are plenty of metrics to measure success, I have a soft spot for innovation rate. It’s a game-changer for businesses looking to stay ahead of the curve. The innovation rate measures the percentage of revenue that comes from new products or services. By focusing on this KPI, leaders can ensure they’re always evolving and adapting to changing market demands. It also encourages a culture of creativity and experimentation, giving teams the freedom to think outside the box and dream up new ideas. The benefits are endless: increased customer satisfaction, higher profits and a competitive edge that can’t be beaten. Plus, it keeps things exciting and fresh so you don’t get stuck in a rut. – Pratik Chaskar, Spectra
2. Customer Lifetime Value
Customer lifetime value (CLV) is an important KPI because it measures the total amount of money a customer is projected to spend on your products or services over the entire duration of their relationship with your company. By knowing the CLV, a business can identify its most valuable customers and tailor its marketing and retention strategies accordingly to maximize revenue and profitability. This metric can also help companies prioritize investments in customer acquisition and retention and evaluate the success of those efforts over time. – Anna Anisin, DataScience.Salon
3. The Cash Conversion Cycle
The cash conversion cycle (CCC) is a critical KPI that business leaders should keep an eye on. It combines several important cash metrics into a single value representing how quickly a company converts its resources into cash. It’s calculated by taking DSO (days sales outstanding) plus DIO (days inventory outstanding) minus DPO (days payables outstanding). By analyzing this metric over time, business leaders can zero in on what changes can be made to increase liquidity. This is important because, even if a company is profitable, it can be in dire straits if cash isn’t generated quickly enough. Finally, while the CCC is important for all businesses, it’s essential to note that it’s most valuable when benchmarked against companies in similar industries. – Jack Perkins, CFO Hub
4. Employee Engagement
Based on many social media conversations, I would say “employee engagement” because companies finally realized that the best KPI to measure is how comfortable their employees are in their offices, no matter the salary and other “additions” that could exist around there. What they gain by paying attention to employee engagement I can divide into three areas of success: 1. Stop employee turnover. Just imagine how your company looks with a high rate of employee turnover; 2. Give better customer service to your clients because your employees are comfortable with your company; 3. Enhance the productivity of your teams. In a great work environment, all team members will have great performance. – Alfredo Atanacio, Uassist.ME
5. Customer Satisfaction
One KPI that more business leaders should be paying attention to is customer satisfaction. Customer satisfaction is an extremely important measure of how well your business is doing, and it can give you valuable insights into your consumers’ needs and preferences. This is extremely beneficial to business leaders because it helps them identify areas within their business where they can make improvements, as well as target marketing and promotional efforts to specific customer segments. By taking the time to measure customer satisfaction, business leaders can ensure their customers are happy and loyal, leading to greater customer retention, increased profits and a better overall business experience. – Rachel Beider, PRESS Modern Massage
6. Net Promoter Score
The Net Promoter Score (NPS) is one of the best metrics to keep measure of. It assesses customer loyalty and satisfaction by gauging their likelihood to recommend the company to others. Monitoring NPS enables leaders to gauge overall customer sentiment and advocacy, with a higher score indicating strong loyalty, positive word-of-mouth referrals and growth potential. Additionally, tracking NPS helps leaders identify areas of improvement, address customer concerns and prioritize customer-centric strategies. – Ian Sells, JoinBrands.com
7. Return On Investment
Tracking your return on investment allows you to look into how much a company spends versus how much they earn. For example, a good ROI would be marketing. The more you market your company on the proper platforms, the more clients you bring in, allowing your company to earn more money. – Micky Klein, Micky Klein Interiors
8. Referrals
Referrals are the highest compliment an entrepreneur can get. In fact, some of the most solid and long-lasting businesses are based solely on referrals—they are that powerful. Keep track of referrals and offer incentives. One of the things that makes a referral such a great measure of performance is all of the things that must be working in concert to make a referral possible, including customer service, performance, staying relevant in the face of competition and relationship building. You cannot automate this measure; it has to be tracked closely in your sales. Constant feedback loops that are automated are also not going to increase referrals; it is a team effort. Measure referrals and incentivize them to see your business grow sustainably and profitably. – Matthew Capala, Alphametic
9. Repeat Purchase Rate
There are so many important KPIs that business leaders should pay attention to, but one important KPI that I am particularly attentive to is the repeat purchase rate. This is the percentage of customers who return to purchase your product again. It helps you understand how good your company is at enticing your customers to come back. By analyzing this KPI, you can easily optimize your marketing strategies for better results. – Josh Kohlbach, Wholesale Suite
10. Customer Effort Score
Business leaders across all industries should track their customer effort scores. This number indicates how easy or difficult it is for a customer to complete a specified task, like joining your email list or purchasing a product. Establishing an effort score system and tracking the results will help you create a better user experience and make it easy for customers to choose your brand over the competition. – John Turner, SeedProd LLC
11. Brand Engagement
Brand engagement looks different for every organization, but you will certainly know how best to determine how and when your users interact with your brand. For example, we’re a publishing company, so we focus on engagement metrics like social shares and “point source” inbound traffic (e.g., an influx of traffic due to a high-visibility link on a high-traffic website or social media account). Understanding the sorts of content or other actions that drive engagement helps you plan future engagement efforts, leaning into what works and leaning away from what doesn’t. – Andrew Schrage, Money Crashers Personal Finance
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