What are performance metrics? Why should small businesses track them?5 min read

What are performance metrics? Why should small businesses track them?5 min read

Reading Time: 4 minutes

Performance metrics give small business owners a benchmark to compare the efficiency of efforts towards 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 business 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 ensure that you keep away from 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.

Don't lose sight of your leads

Track every step of your customer journey and analyze wins/losses for accurate forecasting into your sales pipeline.

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.

Optimize sales performance

See what's working, what isn't, and the necessary adjustments you need to make to your sales processes for better performance.

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.

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. Results of this evaluation can lead to 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.

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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.