Metrics That Matter: What to Measure for Smarter Decisions
We all know - metrics matter. Making decisions based off data versus emotion is the smarter (and more obvious) choice. But what should you be measuring? I've put together a list of suggestions. Send these over to the data cruncher on your team. They'll feel excited you care, and you'll be a stronger leader equipped with the info!
Here are the top 5 metrics a small to mid-sized business should track as they evaluate their 2024 performance and prepare for 2025:
1. Revenue and Profitability Metrics
Why It Matters: Revenue shows growth, while profitability indicates financial health and efficiency.
Key Metrics:
Year-over-Year Revenue Growth: Tracks annual sales growth to assess overall business expansion.
How to Measure: Revenue Growth (%)=(Revenue in Current Year - Revenue in Previous Year/Revenue in Previous Year)×100
Data Needed:
Total revenue for the current year and previous year (available in accounting or financial reports).
Tools:
Financial software (QuickBooks, Xero) or accounting dashboards.
Net Profit Margin: Measures the percentage of revenue left after all expenses, highlighting financial efficiency.
How to Measure: Net Profit Margin (%)=(Net Profit / Total Revenue) ×100
Data Needed:
Net profit (total revenue minus all expenses).
Total revenue from financial statements.
Tools:
Profit and loss statements or accounting software.
Recurring Revenue: Indicates the stability of income, especially for subscription-based or repeat-customer models.
How to Measure:
Sum up revenue from subscriptions or repeat purchases.
Calculate percentage of total revenue from recurring sources.
Data Needed:
Revenue categorized by source.
Tools:
CRM systems or subscription management tools like Chargebee or Stripe.
Insight for 2025: Understand which products or services are driving growth or eroding profitability and adjust pricing, focus, or cost structures accordingly.
2. Customer Acquisition and Retention
Why It Matters: Balances the need for attracting new customers with retaining existing ones, both of which are vital for sustainable growth.
Key Metrics:
Customer Acquisition Cost (CAC): Measures the cost of acquiring a new customer.
How to Measure: CAC=Total Sales and Marketing Expenses / Number of New Customers Acquired
Data Needed:
Marketing and sales spend.
Number of new customers acquired during a specific period.
Tools:
Marketing platforms (Google Ads, Facebook Business Manager) and CRM systems.
Customer Retention Rate: Tracks the percentage of customers who remain loyal over time.
How to Measure: Retention Rate (%)= (Number of Customers at End of Period - New Customers Acquired During Period / Number of Customers at Start of Period) x100
Data Needed:
Number of customers at the start and end of the period, plus new customers acquired.
Tools:
Customer databases or CRM platforms (HubSpot, Salesforce).
Lifetime Value (LTV): Calculates the total revenue expected from a single customer.
How to Measure: LTV=Average Purchase Value × Purchase Frequency × Customer Lifespan
Data Needed:
Average revenue per customer, purchase frequency, and average customer lifespan.
Tools:
Analytics tools like Google Analytics or business intelligence platforms.
Insight for 2025: Evaluate the ROI on marketing strategies and find ways to enhance customer loyalty programs or reduce churn.
3. Operational Efficiency
Why It Matters: Identifies bottlenecks or inefficiencies that could be costing time or money.
Key Metrics:
Revenue Per Employee: Indicates workforce efficiency by dividing total revenue by the number of employees.
How to Measure: Revenue Per Employee=Total Revenue / Total Number of Employees
Data Needed:
Total revenue and headcount during the period.
Tools:
Financial systems and HR platforms.
Cycle Time for Key Processes: Measures the time it takes to complete critical workflows (e.g., customer onboarding, order fulfillment).
How to Measure:
Measure the time taken to complete specific processes (e.g., lead response time, order fulfillment).
Data Needed:
Start and end times for each process.
Tools:
Workflow or project management tools (Asana, Monday.com).
Utilization Rates: Tracks how effectively resources (people or equipment) are being used.
How to Measure: Utilization Rate (%)= (Billable Hours / Total Hours Worked) ×100
Data Needed:
Total hours worked and hours billed to clients.
Tools:
Time-tracking software (Toggl, Harvest).
Insight for 2025: Pinpoint inefficiencies to streamline operations and optimize resource allocation.
4. Marketing and Sales Performance
Why It Matters: Provides insight into how well marketing efforts translate into revenue.
Key Metrics:
Lead Conversion Rate: Tracks the percentage of leads that convert into paying customers.
How to Measure: Lead Conversion Rate (%)= (Number of Leads Converted / Total Number of Leads) ×100
Data Needed:
Number of total leads and converted leads.
Tools:
CRM systems or marketing platforms.
Return on Marketing Investment (ROMI): Measures the revenue generated for every dollar spent on marketing.
How to Measure: ROMI (%)= (Revenue from Campaign - Marketing Cost / Marketing Cost) ×100
Data Needed:
Revenue generated from campaigns and associated costs.
Tools:
Marketing analytics dashboards (Google Ads, Facebook Ads Manager).
Sales Cycle Length: Monitors the average time it takes to close a deal.
How to Measure:
Calculate the average time from initial lead contact to deal closure.
Data Needed:
Timestamped sales data (e.g., lead creation and deal close dates).
Tools:
CRM platforms.
Insight for 2025: Identify high-performing campaigns or channels and shift focus toward strategies with the best ROI.
5. Employee Engagement and Productivity
Why It Matters: A motivated, productive workforce drives business success and innovation.
Key Metrics:
Employee Turnover Rate: Tracks how often employees leave, providing insight into satisfaction and retention.
How to Measure: Turnover Rate (%)= (Number of Employees Who Left / Average Number of Employees) ×100
Data Needed:
Number of employees at the start, end, and those who left during the period.
Tools:
HR platforms or payroll systems.
Employee Engagement Scores: Measures morale, satisfaction, and alignment with company goals (via surveys or pulse checks).
How to Measure:
Use employee surveys or pulse check tools to assign scores based on satisfaction and engagement.
Data Needed:
Survey results and participation rates.
Tools:
Employee engagement platforms (Officevibe, Culture Amp).
Training Completion Rates: Tracks investment in employee development and its alignment with business goals.
How to Measure: Completion Rate (%)= (Employees Who Completed Training / Total Employees Assigned Training) ×100
Data Needed:
Training assignments and completions.
Tools:
Learning management systems (LMS).
Insight for 2025: Enhance workplace culture, professional development, or employee benefits to retain top talent and improve productivity.
Using These Metrics for 2025 Strategy
Data-Driven Decisions: Use these metrics to pinpoint underperforming areas and opportunities for growth.
Set Realistic Goals: Create specific, measurable goals for each area based on 2024 data.
Align Teams: Share these metrics with your team to ensure alignment and foster collaboration toward 2025 objectives.
By focusing on these key metrics, small to mid-sized businesses can transition into the new year with a clear understanding of their performance and actionable insights to enhance success. And if you're not measuring much currently, don't be ashamed! Just get it started - the end of the year is the perfect time to start fresh. You've got this. And if you can’t see someone on your team tackling this, just reach out. One of our fractional leaders can put this into place for you in no time.
