Understanding how KPI works can make or break a business.
KPI stands for a key performance indicator and can show how well a business is doing in certain months.
There are different KPIs in a business that measures how well a business is performing. But not all of them give an accurate assessment of how a business is performing.
As a business, you need to know the best performance KPIs and why they should be tracked. They can offer insight into what you should be doing differently in your business.
1. Customer Lifetime Value
One of the most important performance metrics is customer lifetime value. This means you’re calculating how much a lifetime customer will get you for your business.
This is important because you’re not trying to find new customers. The focus of your business is calculating how much a repeat, lifetime customer.
2. Employee Turnover Rate
Another key performance metric is the employee turnover rate. This is an important metric when it comes to measuring workplace culture.
If your business has a high turnover rate, then it’s probably because the culture is not great for employees. These employees who are leaving don’t feel like there’s room for growth or they don’t feel welcome in the workplace.
It can be insightful if you need to change this in your own workplace.
3. Employee Satisfaction
Similar to employee turnover rate is looking at employee satisfaction. You want to be able to assess how happy your employees are when they are doing their job.
If they are happy with their job, then it helps bring in more leads and ultimately more sales.
4. Profit Margin
Profit margin is how much your business is earning after overhead. It’s after you pay your employees and the supplies you need to keep your business running.
You want a profit margin that is going to keep your business afloat but also give you a decent income.
5. Customer Acquisition Costs
One of the final key performance indicators you should look at is customer acquisition costs.
This is how much you’re paying on advertising to attract new leads and new customers. If you’re overpaying to land new customers, you may discover that you have a negative net profit.
For example, you don’t want to spend $500 on advertising and each customer is only ever worth $25 when they make a purchase. You want to justify your advertising on how much you’re getting from each customer in your business.
Now You Know the Best Performance KPIs
Finding the best performance KPIs for your business can be challenging because there are a lot of KPIs to look at.
But ultimately, you have to decide what’s going to help your business thrive the most. These 5 KPIs in this article can help you make your business more profitable.
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