As an entrepreneur, it is essential to measure and master your key indicators to analyze your performance, anticipate your needs and follow your development with precision. Business performance indicators, also known as KPIs (Key Performance Indicators), are tools that measure the health of the company and a means to support strategic decision making.

 

Types of Business Performance Indicators

There are several types of process performance indicators. Knowing which indicators to use to measure your company’s performance may require professional assistance. Indicators fall into three broad categories:

Financial Performance Indicators

These financial indicators allow you to analyze the actual health of your company. They include profitability rate, product operating cycle, return on assets, working capital requirements or cash flow and payment times. These KPIs are also used to compare the performance of two companies belonging to the same industry in terms of external growth.

Organizational Performance Indicators

These KPIs focus on the company’s human resources, its overall productivity and its ability to retain talent. They represent absence rates, accident rates, costs and production capacity used. Organizational indicators are used to identify areas for improvement within the company’s departments.

Business Performance Indicators

Commercial performance can be defined as a company’s ability to generate maximum commercial profitability from the human and material resources at its disposal.

Commercial performance indicators aim to determine the most profitable activities that contribute to the internal growth of a company. Conversion rate, online click-through rate, sales ratio per customer and NPS score are examples of commercial performance indicators. They measure the performance of an individual or the productivity of a department.

You want to optimize the management of your company?

As a business leader, you need to measure and analyze your financial and commercial performance. What are the most important performance indicators for your company? Here are the top 10 key indicators to monitor closely.

 

Top 10 Key Performance Indicators

1.  Sales Figures

Sales are often considered the most obvious management indicator. Its purpose is to help you evaluate the amount of sales in relation to a target set over a given period. Regularly comparing your actual performance with your initial forecast allows you to adjust your company’s strategy as you go along and to control your costs.

You get your sales and cost variances by subtracting the amount of your actual transactions from your forecasted income. Your revenue variances allow you to track your sales and purchases over time and to see if your goals have been achieved. This calculation usually requires some accounting knowledge, so please contact us if you want to evaluate your financial situation.

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2.  Conversion Rate

The conversion rate refers to the percentage of users who perform an action desired by the company. It can be:

  • From a white paper download
  • From a sale
  • Signing up for a newsletter
  • Submitting a quote request form
  • Signing up for a service

If the conversion rate is high, users are interested in what you offer and are easily convinced by your content to become active customers. A good conversion rate is usually between 2 and 5%, but it can vary depending on the business sector and industry.

3.  Customer Lifetime Value (CLV)

Customer lifetime value is an estimate of how long a customer will use your products. This indicator refers to the total revenue that a customer can generate throughout their relationship with your company.

How to use this performance indicator effectively? By comparing it to your customer acquisition cost. If the customer lifetime value is lower than your cost of acquisition for that customer, it means you are spending too much of your resources on customers who do not stay for long.

4.  Average Revenue per Customer

Average revenue per customer or user is a technical indicator for measuring the performance of average revenue per customer, or user over a given period. The formula is as follows:

Average revenue per customer = (Total revenue/Number of customers) over a given period

This indicator is useful for analyzing and visualizing your monthly evolution and monitoring the progress or regression of revenue per customer over time. It will also allow you to know how your customers’ interest in your company’s products or services varies over the months and years.

5.  Customer Acquisition Cost

This is a key performance indicator (KPI) to ensure the sustainable growth of your business. Customer acquisition cost refers to the amount invested to recruit a new customer. The value of this indicator lies mainly in the fact that it allows you to measure the effectiveness of your sales and marketing efforts. It allows you to evaluate these efforts according to the distribution channel.

To calculate it, you need two numbers:

  • The total amount of money your company spent over a given period of time to generate leads
  • The number of customers you were able to retain during the same period

Here is how to calculate the cost of customer acquisition:

Customer acquisition cost (CAC) = (Marketing costs + Sales costs)/Number of customers retained

6.  Customer Retention Rate

It’s great to acquire new customers, but it’s even better to keep them. Don’t fall into the trap of only focusing on attracting new prospects. The customer retention rate is an indicator that allows you to evaluate your company’s ability to retain its customers. In fact, many companies claim that customer retention gives them a competitive advantage. Here is the formula for its calculation:

Customer retention rate = (Number of loyal customers/Total number of customers) x 100

This indicator will help you know how to increase your customer retention with a minimum of cost and effort.

7.  Performance Indicators for Emailing Campaigns

Make sure you measure the effectiveness and profitability of your email campaigns so you can adjust them when necessary. To track the performance of your campaigns, simply monitor the statistics provided by the dashboard of the platform you use. Here are the performance indicators to take into account:

Opening Rate

The open rate of an emailing campaign refers to the number of opened emails compared to the total number of emails sent. To calculate this rate, it is important for the company to set clear and precise goals. It is calculated as follows:

Open rate = (Number of emails opened/Number of emails delivered) x 100

The open rate is a measure of the performance of email campaigns. If the rate is high, it means that the subject lines of the emails generate interest in your recipients.

Click-through Rate (CTR)

This performance indicator refers to the number of recipients who clicked on at least one link in the delivered email. It is calculated as follows:

Click-through rate = (Number of clicks on a link in an email/Number of emails delivered) x 100

The click-through rate reflects the relevance and quality of the message sent and its propensity to prompt the recipient to take action.

Deliverability Rate

The email deliverability rate is the percentage of successful emails that were delivered to the recipients’ main mailbox and not to their spam folder. It is measured as follows:

Deliverability rate = (number of successful emails/total number of emails sent) x 100

Thanks to this indicator, you ensure that your database is clean, i.e. regularly optimized.

Churn rate

This rate refers to the number of people who clicked on the unsubscribe link to stop receiving emails from you. It is calculated as follows:

Unsubscribe rate = (Number of clicks on the unsubscribe link/Number of successful emails) x 100

A high churn rate may signal a problem with content relevance.

8.  Dropout Rate

If you are in the e-commerce business, the shopping cart abandonment rate is an essential KPI to monitor. It corresponds to the number of products added to a virtual cart, without a final purchase. It is calculated in relation to the total number of products added to the cart over the same period.

By monitoring this performance indicator, you will be able to identify problems encountered by the user when trying to make a purchase from your website and make strategic decisions to improve the customer experience and achieve your goals.

9.  Customer Loss Rate

Also known as attrition rate, the customer loss rate is a process performance indicator that measures the phenomenon of losing customers or subscribers.

Losing customers is something natural that cannot be avoided, but can be kept under control. This indicator will allow you to keep an eye on your customers. If the rate increases over time, you should review your products, services or purchasing procedures.

10.    The break-even Point

The break-even point is a figure that differs from one company to another and corresponds to the volume of activity at which the company becomes profitable. In other words, it refers to the turnover that the company must reach in order to start making a profit and cover all its expenses. It includes factors such as turnover, fixed costs and variable costs.

This indicator is considered important to control the evolution of your goals and the management of your daily activity in order to attract new investors. It must be monitored on a regular basis, as it is an early warning level in case of slippage in expenses.

Cofinia accompanies small and medium-sized companies in their daily life in order to optimize their financial and accounting management. Do not hesitate to contact us or to book an appointment if you want to analyze the situation of your company and propel your growth!

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