Small business owners struggle to know the health of their businesses. They look at revenue as the only key performance indicator of their business.
Revenue doesn’t tell the entire story of your business, though.
You can have a business that earns over a million dollars in revenue, but not turn a profit. There are so many facets of the business, measuring some of them tell you how your business is really doing.
This guide to measuring KPIs for small business owners to learn how you can measure success in your business.
1. Employee Turnover
Do you know how much employee turnover costs your business? It might not seem like much when an employee leaves your company.
It can cost your business half to two times the employee’s salary to replace them.
Tracking employee turnover helps small business owners identify morale and other issues. You can work to improve the turnover rate and productivity.
2. Average Order Value
Ecommerce businesses should look at how much their customers order each time. The average order value uncovers opportunities to add revenue.
A low average order value means you can upsell customers additional products before they check out.
3. Conversion Rate
Conversion rates apply at various points of the customer journey. You can see how many website visitors convert to subscribers or how many leads convert to customers.
Pick which conversions are the most important ones to track for your business.
4. Lifetime Value of a Customer
Track how long you retain customers, how often they buy, and how much they spend with you. This is the lifetime value of a customer.
This business metric helps you determine how much you can spend on marketing. You don’t want to spend more than the lifetime value of a customer to acquire the customer.
Inventory shrinkage is a problem for retailers, to the tune of $61 billion. Employee theft, breakage, and mishandling are the main causes of shrinkage.
You could be losing a lot of money by not measuring shrinkage. Run inventory checks regularly and match the
How to Choose and Measure KPIs
Small business owners have to figure out which KPIs are worth measuring. The top KPIs aren’t always appropriate for every business.
Take your business goals into account. Do you want to reduce employee costs? KPIs like employee turnover and employee satisfaction are helpful KPIs because if you reduce turnover, you save money on hiring and training new employees.
Consider the business stage. You might have a startup business, so it’s too early to tell the lifetime value of a customer. Established businesses would benefit from this KPI.
There are plenty of tools to help you measure business KPIs. Ideally, you want to find an app like this one from Stark Industries. A KPI dashboard keeps tabs of the most important metrics in one place.
Business KPIs for Small Business Owners
Small business owners need to find ways to know if their business is flourishing or if there are signs of failure underneath the surface.