By Victor Sklyanik
There are a lot of ways businesses and teams measure success. You can take a look at your profits month over month, or examine how your business has grown over a set period of time. However, if you want to get a well-rounded overview of how your company is performing in specific areas, then you need to look at KPIs.
KPIs, or key performance indicators, can be used by any type of business, from self-employed freelancers to startups and companies with dozens of employees. There are many different types of KPIs that can be used across multiple departments and teams. For example, you might create a website and then measure the success of clicks or conversions using KPIs. Alternatively, your HR team can apply them to your onboarding process to see how many employees you’re retaining.
Since there are dozens of different KPIs out there, it can be tough to know which ones to focus on if you’re just getting started. Here, we’ve gathered some of the most important KPI examples that you can use for your business.
What are KPIs?
A key performance indicator is a metric that measures the performance of a business, team, individual, or project. They’re one of the main ways of assessing whether or not you’re meeting your goals or target objectives.
KPIs need to be measurable so that you can monitor change over time. In addition, they need to have a distinct goal as well as a clear source of data that can be relied upon for important decisions. This data needs to be looked at often so that you can continuously track your KPIs to see how close you are to your goals.
While there are hundreds of different KPIs out there, there’s no need to implement all of them for your business. When looking at the overall performance of your business, stick with around five different KPIs to measure your progress. Then, you can also track more specific KPIs for each department, such as marketing, sales, HR, customer service and development. This will help each department work together towards a more clearly defined goal, while still working towards the overall company targets.
KPI examples and definitions
These are some of the most common KPIs broken down into industry or department. If you’re starting a business, understanding the types of KPIs available to you is crucial for assessing future success. You might want to use a few of them for each one of your teams, or just select a few important KPIs for your entire business.
Sales KPI examples
01. Total Sales Volume: Measures the total volume, in dollars, of sales each month. Create a monthly or quarterly target so that your sales team has a goal, and be sure to adjust it regularly for dips or increases in sales which might occur around seasonal events or holidays.
02. Sales Cycle Length: Taking too long to complete a sale can negatively impact your bottom line and prevent you from reaching your quarterly goals. This KPI helps you measure how long it takes for a sale to be completed from start to finish.
03. Sales By [Metric]: You can break down where your sales are coming from by different metrics, such as region, age, sex, demographic, interests, etc. This helps you see which clients are bringing in the most revenue and which are underperforming.
04. Sales Cost to Volume Ratio: Making a sale is almost never free. A good chunk of your budget is probably going into each sale, with costs like salary or commissions, marketing costs, etc. That’s why it’s important to measure your sales expenditures vs. what your sales team is generating. This will help you see if your sales team is operating efficiently or not.
Financial KPI examples
05. Revenue: In and of itself, revenue isn’t a KPI, but depending on your business, there are a few ways to measure this in terms of performance. Calculating your profit minus your costs is one of the main ways companies determine if they’re generating revenue.
You should be measuring this KPI regularly by year, quarter and by month.
Create a yearly revenue plan where you map out your expectations, then track your revenue over each quarter and month. Next, compare it to your yearly plan to see if you’re meeting your goals or if your initial yearly plan needs to be adjusted to meet more realistic expectations.
06. Free Cash Flow: This metric measures how much you can generate compared to your company’s operation costs. In order to calculate your free cash flow, you need to subtract your capital expenditures from your operating cash flow. This KPI is often used by investors to see if a business is profitable or not.
07. Gross Profit Margin: Get a percentage value of your total sales revenue. This KPI doesn’t look at expenses, but instead focuses mainly on profits. It’s a good yardstick to use when comparing your profits to that of your competitors.
08. Net Profit Margin: This KPI looks at the total percentage of your revenue after you deduct all your expenses, like operating costs, taxes and interest. Net Profit Margin is more helpful for internal comparison of your profits.
Marketing KPI examples
09. Traffic: This is a pretty common KPI example. Here, you’re looking at the total number of visitors to your business, whether it’s traffic to your website or visitors in a physical location. You can measure the differences of this KPI over any amount of time, such as by hour of the day, day of the week, or month after month to see when you’re getting the most visitors.
10. Cost Per Lead: Once your traffic is converting into leads, you’ll probably want to know what each lead is costing. You might look at your cost of bringing in traffic or running your campaigns. This is a common KPI in online marketing and it usually measures how many people express interest in your business vs how many people see your ad or campaign. Many popular web analytics tools will allow you to set up this KPI to easily keep track of your progress.
11. Cost Per Phone Call: Sometimes the goal of your advertising campaign is to bring in calls. Calls can either directly be the source of sales or, if not, can be the start of a relationship between a potential customer and a business. When someone calls a business, they are likely very interested in what they have to offer, making cost per phone call a good metric. The complication, however, is that it may be difficult to track which advertisement brought in the call. Consider using a call tracking service to help you determine whether your ad spend was worthwhile.
12. Conversion Rate: A conversion rate takes things a step further than the cost per lead. This KPI measures how many conversions, or sales, you get compared to traffic. For example, if your website sees 1,000 visitors a month and you make 50 sales, your conversion rate is 5%.
13. Time on Site: This is one of those KPI examples that often stumps marketers since it can be tricky to optimize. You want to see how much time visitors are spending on your site before exiting or converting. If they’re leaving your site after only a few seconds, it’s likely that something is wrong with your website performance, usability, relevance, or content.
Customer KPI examples
14. Customer Lifetime Value: Customer relationships are important, but it’s necessary to know how much value each client brings to your business. Customer lifetime value calculates how much monetary value you get from a client’s entire history with your company. To calculate this, you need to look at metrics like total purchase values and the number of purchases over time.
15. Customer Acquisition Cost: If you want to measure the effectiveness of your marketing, you need to look at how many clients it’s bringing you and whether it fits into the cost of your campaign. To arrive at this KPI, divide the total number of new clients you have by your acquisition expenditures.
16. Abandon Rate: This is an important metric for a customer support team since it can help you mitigate the number of unsatisfied clients. If clients are calling or chatting and then hanging up or getting disconnected before speaking to a representative, it’s important to understand why. Is your wait time too long? Did they find answers elsewhere? Abandon rates will help you understand your clients better and also optimize your customer support resources.
17: First Contact Resolution: Another important KPI for your customer support team is the rate of first contact resolution. Measure the number of clients who need to reach out to customer support multiple times for the same issue. This will help you understand where your team needs extra training to learn to resolve issues quicker, or where your process needs to be improved to avoid repeat contacts for the same issue.
HR KPI examples
18. Employee Turnover Rate: The overall success of your business depends heavily on your employees, so it’s crucial to know how often your team is changing. Calculate the number of employees who have left in a period of time by your total employees. A high rate might mean it’s time to reexamine your onboarding process, employee expectations, or company culture.
19. Revenue Per Employee: This is another common KPI that helps measure efficiency. You want to see how profitable each employee is, so start by calculating your total revenue by your total number of employees. Many investors will ask for this KPI as well since it’s a good indicator of how a company manages costs.
20. Employee Satisfaction: Send out regular surveys or quizzes to understand how satisfied your employees are with your company and their jobs. This can be a challenging KPI to measure accurately, but it will help the health of your business by showing you which employees or teams need attention before they’re unhappy enough to quit and leave you with gaps in your operation.
21. Training Costs: You should be looking at how much you’re investing in each employee’s training. New hires will usually cost more, but there’s also the cost of ongoing training and education. A high rate of training costs isn’t always a bad thing. Investing in your employees can often lead to higher employee satisfaction and more productive workers.
Tips for choosing the right KPIs for your business
While it’s important to be aware of the many KPI examples, it’s even more important to assess which KPIs will help your business succeed. Not all KPIs will be relevant to every type of business, so take your industry, goal, and your company’s needs into consideration.
For starters, ask yourself what you’re trying to achieve with your business. You can break this down by year or quarter to focus on different aspects of your company and use different KPIs. Maybe one quarter you want to pay closer attention to generating more leads, in which case you’d use more marketing KPIs, and then the following quarter you want to turn those leads into sales. Your KPIs should follow your general goals, not the other way around.
Here are a few things to keep in mind to help you select the right KPIs to use for your business:
Make sure your KPIs directly relate to your goal. If your goal is to boost sales, look at things like site traffic and conversion rates.
Focus on a few key metrics. Instead of measuring anything that can be measured just for the sake of it, focus on a handful of KPIs at a time. Only once they’re optimized, move on to a different set of KPIs.
Consider what stage your company is in. Are you just starting out? Going to market? Rebranding? Each stage will have a different set of goals and metrics to measure.
Stay away from vanity metrics. Some KPIs help your business look good, but don’t really mean much in terms of reaching your goals. Metrics like “likes,” views, or clicks might seem impressive, but don’t mean much in terms of whether or not you’re moving closer to your goal. Choose KPIs that help you move your business forward over ones that only look good on paper.
Look at your competitors. There’s nothing wrong with borrowing a set of KPIs from your competitors. If you have a similar business model, products, or services, it can be really helpful to know how you’re performing comparatively.
Image Credits Featured Image: WIX
By Victor Sklyanik - Business and Data Analytics Lead
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