What are performance metrics? Why should small businesses track them?
Reading Time: 4 minutesPerformance metrics give small business owners a benchmark to compare the efficiency of efforts toward achieving their goals in sales, production, or Customer satisfaction.
Understanding how well every business department performs helps you discover potential challenges before things take a downturn.
Small business performance metrics vary depending on the business area and objectives – productivity, profit margin, scope, and cost.
This article will look at the key metrics a business should track.
What are performance metrics?
Performance metrics are data used to track and measure the activities of your business across sales, customer acquisition, employee performance, project management, and more.
You track your set business objectives with the performance metrics.
What does a metric mean? A metric is a system of evaluating performance using figures or statistics from a data set.
Unlike the Key Performance Metric (KPI), the business performance metric measures the productivity of a particular department of your business compared to a set goal. Companies use performance metrics to track KPIs.
So, let’s look at the metrics your small business should track.
Types of small business performance metrics
If you are a small or mid-size business, the following metrics should matter to you.
- Marketing performance
- Financial performance
- Sales performance
- Project management performance
- Employee performance
Marketing performance
As a small business, marketing is essential to create awareness and get your products or services to the eyes of potential customers.
While doing this, you’ll need to consider a couple of metrics to avoid financial challenges.
There are many ways to market your product or service — website, email, social media, etc.
Adopting key marketing metrics such as Cost per lead (CPL), Customer acquisition cost (CAC), Customer lifetime value (CLV), and Customer retention can help you determine the effectiveness of methods and channels required to meet your business objectives.
Also, remember that customer support is one of the fundamentals of your growing business.
Financial performance
These metrics help determine your company’s financial health, including revenue, cash flow, accounts receivables, assets, and liabilities.
A small business owner should keep a close eye on Net income, working capital, gross profit margin, accounts receivable turnover ratio, current ratio, and the percentage of accounts payable overdue.
Sales performance
Keeping track of sales performance can help you identify the hits and fails of your sales efforts and insights into methods that can be applied to improve performance.
Some key sales metrics to watch are total sales revenue, churn rate, quota attainment, and growth rate.
These metrics will help you understand your company’s sales performance better.
Project management performance
This measures the effectiveness of your project management capability against delivery time and profitability.
Track and measure each stage of the project against the set-out goals.
Items to consider are the scope of work, cost, gross margin of the project, quality, and satisfaction level.
Employee performance
This performance metric can help you determine employee satisfaction and work rate.
A business with low-performing employees can lead to a downturn in business activities. Hence it’s crucial to monitor employee performance closely.
You can make use of reliable employee engagement software that will allow the tracking of key performance indicators (KPIs), set clear goals and targets, provide timely feedback and performance evaluations, and identify areas for improvement.
It is also important to provide underperforming employees with the right tools to help them improve their output.
Some key metrics to track are employee turnover, Employee net promoter score (eNPS), revenue per employee (depending on your kind of business), training spend per employee, etc.
Often, small business owners mistake business performance metrics for KPIs. However, they are different.
What are the benefits of tracking performance metrics?
Some of the benefits of tracking your company’s performance metrics are;
- Set and meet expectations
- Minimize turn over
- Improve performance of departments
- Identify faulty processes
- Increase profitability
- Better management of finances
You can evaluate the efficiency of projects by tracking your company’s project management performance. The results of this evaluation can lead to the optimization of processes and profitability.
What Is the Difference Between Performance Metrics and a KPI?
While KPIs can also be metrics, metrics can’t be KPIs. The table below highlights the differences between performance metrics and KPIs.
| Performance metrics | KPIs |
| They are used to track/support KPIs | KPIs can have different metrics that give you a complete picture of a business’s progress toward a goal. |
| They usually measure tactical or operational goals | Used for strategic decision-making in a business |
| Provides more detailed information | Provides overview information of a set-goal |
| They are relevant to specific departments | Relevant across different departments of a business |
Final thoughts
Understanding the performance level of your business is essential, as it paints a picture of what you are doing right or wrong.
With information from tracking metrics, you can make informed decisions for the business to grow, maximize operations to serve customers better, and increase profitability.
You can evaluate, adjust, and make changes to meet your business goals.
Performance Metrics FAQs
- What are business performance metrics?
Business performance metrics track and evaluate the success or failure of business processes across sales, customer acquisition, employee performance, project management, and more.
- How do you measure performance metrics?
Determine the critical factors that are required to achieve your business goals. Then, work with metrics to help you track and achieve the goals. It could be marketing, sales, or employee performance goals.
- How do you measure performance?
Set clear goals for your company, find the benchmark for best practices in your industry or niche, define your success parameters, evaluate your performance, and take necessary action on results
- What are the five performance metrics?
Metrics may be relative to business needs. However, the common five are marketing performance, financial performance, sales performance, project management performance, and employee performance.
- What are examples of metrics?
Some examples of metrics are Cost per lead (CPL), Customer acquisition cost (CAC), Customer lifetime value (CLV), employee turnover, Employee net promoter score (eNPS), revenue per employee, total sales revenue, churn rate, quota attainment, and growth rate.
