Top 10 Business Performance Indicators (SMEs)
As an entrepreneur, it is essential to measure and control your key indicators to analyze your performance, anticipate your needs and monitor your development with precision. Business performance indicators, also called KPIs (Key Performance Indicators) are both tools for measuring the health of the business and a means that promotes strategic decision-making.
Types of business performance indicators
There are several types of process performance indicators. Knowing which ones to measure the performance of your business may require professional assistance . The indicators fall into three broad categories:
● Financial performance indicators
These financial indicators make it possible to analyze the real health of a company. We are talking about the rate of return, the operating cycle of products, the rate of return on assets, working capital or cash requirements and payment terms. These KPIs are also used to compare the performance of two companies belonging to the same sector of activity in terms of external growth.
● Organizational performance indicators
These KPIs focus more specifically on the company’s human resources, its overall productivity and its ability to retain talent. They represent the absenteeism rate, the accident rate, the costs and the production capacity used. The organizational indicators are used to identify the margins of progress within the company’s departments.
● Commercial performance indicators
Commercial performance is defined as a company’s ability to generate maximum commercial profitability from the human and material resources made available to it.
Business performance indicators aim to determine the most profitable activities that contribute to the internal growth of a company. The conversion rate, the online click-through rate, the sales ratio per customer and the recommendation rate (NPS score) are examples of commercial performance indicators. They measure the performance of a person or the productivity of a department.
As a business leader, you need to properly measure and analyze your financial and business performance. What are the most important performance indicators for your business? Here are the top 10 key indicators to follow closely.
Top 10 Key Performance Indicators
Turnover is often considered the most obvious management indicator. Its purpose is to help you assess the amount of your sales in relation to a target set over a given period. Regularly comparing your actual performance with that initially planned allows you to adapt your company’s strategy as you go along and control your costs.
You obtain your variances on your turnover and your costs by subtracting the amount of your actual operations from your forecast income. Your discrepancies on your turnover allow you to follow the evolution of your sales and purchases as you go and to check whether your objectives have been achieved. This calculation generally requires knowledge of accounting , so do not hesitate to contact us if you wish to assess your financial situation.
2. The conversion rate
Conversion rate refers to the percentage of users who take an action desired by the business. It could be:
- Downloading a white paper
- From a sale
- From subscribing to 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 this rate can vary by line of business and industry.
3. Customer lifetime value
Customer lifetime value is an estimate of how long a customer will use your products. This metric refers to the total revenue a customer can generate throughout their relationship with your business.
How to use this performance indicator effectively? By comparing it to your customer acquisition cost. If the customer lifetime value is less than your acquisition cost for that customer, it means you are spending too much of your resources on customers who don’t stay for long.
4. Average revenue per customer
The average revenue per customer or user is a technical indicator for measuring the performance of the average turnover reported to each customer, user or user over a given period. The calculation 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 let you know how your customers’ interest in your company’s products or services varies over the months and years.
5. Customer acquisition cost
It 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 according to the distribution channel.
To calculate it, you will need two numbers:
- The total amount your business has spent over a given period to generate leads
- The number of customers you were able to retain during the same period.
Here is how the cost of customer acquisition is calculated:
Customer Acquisition Cost (CAC) = (Marketing Costs + Selling Costs)/Number of Customers Retained
6. The customer loyalty rate
It’s good to acquire new customers, but it’s even better to know how to keep them. Don’t fall into the trap of just focusing on how to attract new leads. The customer loyalty rate is an indicator that allows you to assess your company’s ability to retain customers. In fact, many companies claim that customer loyalty gives them a competitive advantage. Here is the formula for its calculation:
Customer loyalty rate = (Number of loyal customers/Total number of customers) x 100
This indicator will be useful for you to know how to increase the retention of your customers with a minimum of cost and effort.
7. Emailing campaign performance indicators
Make sure to measure the effectiveness and profitability of your email campaigns in order to adjust them when necessary. To track the performance of your campaigns, simply monitor the statistics provided by the dashboard of the platform you are using. Here are the performance indicators to consider:
● Open rate
The opening rate of an emailing campaign corresponds to the number of emails opened compared to the total number of emails sent. To calculate this rate, it is important for the company to set clear and precise objectives. It is calculated as follows:
Open rate = (Number of emails opened/Number of emails delivered) x 100
The opening rate is used to measure the performance of emailing campaigns. If the rate is high, it means that the subjects of the emails are generating interest among your recipients.
● The click-through rate
This performance indicator corresponds to the number of recipients who clicked on at least one existing link in the email delivered. 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 encourage the recipient to take action.
● The deliverability rate
The email deliverability rate corresponds to the percentage of successful emails that were successfully delivered in the recipients’ main inbox and not in 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 make sure that your database is clean, that is to say optimized regularly.
● Churn rate
This rate refers to the number of people who clicked on the unsubscribe link to no longer receive 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 content relevance issue.
8. The dropout rate
If you do e-commerce, the cart abandonment rate is an essential KPI to monitor. It corresponds to the number of products added to a virtual basket, without there being a final purchase. It is calculated based on the total number of products added to the basket over the same period.
By monitoring this performance indicator, you will be able to identify the problems encountered by the user when he tries to make a purchase from your website and make strategic decisions in order to improve the customer experience and achieve your objectives.
9. Customer churn rate
Also called the attrition rate, the customer loss rate is a process performance indicator that measures the phenomenon of loss of customers or subscribers.
Losing customers is a natural fact that cannot be escaped, but can be kept under control. This indicator will allow you to keep an eye on your customers. If the rate increases over time, then you need to review your products, services or purchasing procedures.
10. The Break-Even Point
The break-even point is a figure which differs from one company to another and which corresponds to the volume of activity from which the company becomes profitable. In other words, it refers to the turnover that the company must achieve in order to be able to start making a profit and cover all its expenses. It includes parameters such as turnover, fixed costs and variable costs.
This indicator is considered an important index to control the evolution of your objectives and the management of your daily activity in order to attract new investors. It must be monitored on a regular basis, as it is a first level of alert in the event of load slippage.
Cofinia supports SMEs in their daily life in order to optimize their financial and accounting management. Do not hesitate to contact us or to make an appointment if you wish to analyze the situation of your company and propel your growth!
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