What Are Business Metrics? 35 Metrics Businesses Need to Track (2024)

Companies can improve their profitability in three ways: generate more revenue for a givencost, generate the same revenue for a lower cost or both. All methods require measuring andtracking operational performance meticulously — and that cannot be done withoutbusinessmetrics.

The right business metrics will not only help you achieve your business goals, but will alsoidentify areas that are meeting (or exceeding) expectations while pinpointing those that arefalling short. It’s all about allocating your resources wisely and strategically.

What Are Business Metrics?

Business metrics are quantifiable measures used to track business processes to judge theperformance level of your business. There are hundreds of these metrics because there are somany different kinds of businesses, with many different processes.

Generally, individual divisions or departments within a company, such as manufacturing,marketing and sales, are responsible for monitoring the metrics that track the performanceof their parts of the business. Senior executives track more general metrics. CFOs, forinstance, track earnings before interest, taxes,depreciation and amortization (EBITDA), a universal measure of profitability, andthe metrics that feed into it, such as net sales, operating expenses and operating profit.The CFO dashboard pictured below provides a high-level view of a company’s financialperformance.

The COO of a manufacturing company, meanwhile, might want to track the perfect order rate, akey performance indicator (KPI) tomeasure the performance of warehouse operations. CEOs are likely to closely monitor just ahandful of summary metrics drawn from the dashboards of each of their direct reports.

Key Takeaways

Tracking the right business metrics is vital to improving company performance.
With so many possible business metrics, it’s important to choose the ones thatmatter most to your business.
Every business should track its performance in sales, marketing, finance and humanresources (HR) in order to know how it is doing and how it might improve performance.

Benefits of Tracking Business Metrics

Tracking the metrics that are most important to your business — and managing operationsbasedon the results — maximizes the business’s chances of success. It’s thatsimple.And that hard. The key word here is “important”. For instance, executive searchprofessionals might track how many candidates they bring to a client. But what matters tothe client is the speed with which the position is filled and the quality of the candidates;those are the important metrics to measure and track.

Here are six key benefits of tracking business metrics that matter:

Performance improvement:
Tracking the right business metrics tells you how well or poorly the business isdoing and provides direction for how to improve operations.
Comparative analysis:
Tracking business metrics reveals whether the business is over- or underperforming onkey industry benchmarks.
Alignment:
Business metrics can be used to ensure the entire company is working toward sharedorganizational goals.
Compliance:
Mandates to track certain business metrics from governmental and other regulatoryagencies require companies to monitor them to stay in compliance.
Communication:
Reporting business metrics is a vital communications tool for customers,shareholders, employees or society at large.
Identifying problems:
Analyzing business metrics can help identify emerging problems in time to correctthem before they become major pain points.

What Business Metrics Should You Use?

This is a vital question because there are so many business metrics to choose from. In theabsence of clarity around business goals, some organizations can go“metrics-crazy” and tryto monitor too many things. While every business is different and, therefore, the metricsthat matter are different for each of them, these four questions can be powerful tools toidentify what matters most to any business:

Is the metric directly relevant to the performance of thebusiness?
Does it help predict future performance in a useful way?
Can it be reasonably measured?
Can the business team associated with the metric impact it — and are theyauthorized todo so?

35 Key Business Metrics to Track in 2022

Step one is to identify the most important KPIs for your business. Step two is to go aheadand track these KPIs. There are several basic KPIs that are important, if not required, forevery business.

Sales Metrics to Track

Sales metrics measure and evaluate the sales-related performance and activities of anindividual, team or company over a given period of time (for example, weekly, quarterly orannually). Analyzing sales metrics helps identify what is and isn’t working andprovides insights into actions to take to improve sales performance. Here are a few keymetrics to track in sales.

Net sales revenue:
Revenue is the lifeblood of any company; it factors into every aspect of businessdevelopment, especially sales. Depending on the size and maturity of your business,you may want to track several types of sales revenue metrics. Examples includeannual recurring revenue (e.g., from multiyear contracts), average revenue generatedper user or customer, revenue by product or product line, revenue by territory ormarket and revenue generated per sales rep. Formulas for each of these and more areavailable in our sales metrics guide.But above all, be sure to track net sales revenue. The formula for calculating netsales is:
Net sales = Gross sales - Discounts- Returns - Costs associated with discounts and returns
Quota attainment:
Likewise, there are many metrics oriented around sales goals, but quota attainmentmay be the most universal. Are you looking to increase the number of reps reaching100% of their quotas? Start by learning how many already have. Results can show youwhere to concentrate your efforts. Are you considering whether to ramp up sales inspecific regions or markets? You can monitor these targets by measuring theirperformance against quota. The formula is:
Quota attainment = Amount of salesachieved by a particular rep or region / Goal for that rep or region
If the goal is $10 million and the rep achieved $9 million in sales, they’re at90% of quota.
Growth rate:
Year-over-year growth, which is similarly easy to calculate, is an important overallindicator of the health of your business. When compared to industry benchmarks, ittells you how well or how poorly your sales team is performing compared to thecompetition. The formula is:
Sales growth rate = (Current yearrevenue - Previous year revenue) / Previous year revenue x 100
If your sales were $12 million this year and $11 million last year, your growth rateis ($12 - $11) / $11 x 100, or 9.09%.
Churn rate:
Churn rate is the percentage of customers who cancel or don’t renew theircontracts or subscriptions for a company’s services or products. This metriccrosses department lines: For sales, it reflects a sales team’s ability toretain customers. For finance, leaders watch churn rates to see the potential impacton a company’s sales and profits. For Software-as-Service (SaaS) businesses,it can mean rising or plummeting subscribers and, hence, revenue. All of theseconcerns can hit the marketing department, too, which needs to evaluate the channelsand campaigns that performed well or fell flat. Rising churn rates could indicate aproblem with a company’s offerings or customer service approach, or it couldmean the company is losing business to competitors. The formula is:
Churn rate = Number of customerslost during period / Starting number of customers at beginning of period x 100
For example, if a company begins Q3 with 5,000 customers and ends Q3 with 4,000customers, then the difference in the number of customers (1,000) indicates a 20%churn rate.
Lead response:
Besides quota attainment, you might want to look into how it takes reps to contact anew lead. Lead response time can be immensely important in certain industriesbecause the quicker a salesperson responds to a person’s inquiry, the moreengaged that person is likely to be and the greater chance of a sale. Calculate leadresponse time as:
Lead response time = Sum of timebetween lead contact to sales rep response for all contacts / Total number of leads
For example, if a sales rep is given 9 leads and responds to 5 leads within 1 day, 3leads within 2 days and 1 lead in three days, the lead response time is (5 x 1 + 3 x2 + 1 x 3) / 9 = 1.55 days.

Marketing Metrics to Track

There are so many ways for businesses to market and advertise their product or service—direct mail, email, websites, social media — that it’s essential to know whatmixworks best. Adopting key marketing metrics helps your marketing team determine how effectiveits methods and channels are in supporting the success of your business.

Financial Metrics to Track

For finance teams, the metrics that matter most are the ones that reflect the financialhealth of the business. After all, a company’s survival hinges on its financialhealth. Thus, most financial metrics concern factors like revenue, cash flow, accountsreceivables and assets and liabilities — there are many financial metrics totrack.

Net income:
Also known as the bottom line, net income is generally one of a business’sbiggest financial concerns. It’s also an important starting point forcalculating other key metrics, like net profit margin and earnings per share. Sinceit reflects total business expenses subtracted from total revenue, net incomegenerally appears at the bottom line of a company’s income statement. Netincome can help assess whether revenue exceeds business expenses and, if so, by howmuch. The formula is:
Net income = Total revenue - Costof goods sold - Operating expenses - Other expenses - Interest - Taxes -Depreciation and Amortization
Net income is different from gross income, which only subtracts the cost of goods orservices sold from revenue.
Net profit margin:
One of the most important indicators of a business’s profitability, net profitmargin measures how much actual profit is netted for each dollar of revenue made.This is important because revenue increases may not always translate into increasedprofitability. Before calculating the net profit margin, a business must calculateits net income. The formula for net profit margin is:
Net profit margin = (Net income /Total revenue) x 100
Gross profit margin:
Unlike net profit margin, gross profit margin shows a company’s profits beforesubtracting interest, taxes and operating expenses like rent, utilities and wages. Ahealthy gross profit margin plays an important factor in whether a business is ableto cover all of its expenses. The formula is:
Gross profit margin = (Revenue -Cost of goods or services sold) / Revenue
See Also
How to measure Conversion Performance with KPIs
Current ratio:
To stay financially fit, a business must be liquid and able to pay off its financialobligations. Current ratio measures a company’s ability to pay off financialobligations that are due within a year and is calculated as the ratio of currentassets to current liabilities. Current assets are those expected to convert to cashwithin a year (such as accounts receivable), while current liabilities areobligations due within a year (such as accounts payable). The formula is:
Current ratio = Current assets /Current liabilities
Generally, a current ratio above 1.0 is considered healthy. A ratio of 2.0, forexample, suggests the business has two times more current assets than currentliabilities. However, a current ratio above 3.0 could indicate the businessisn’t efficiently handling working capital. Note that current ratio is only aquick, short-term snapshot of solvency and must be calculated regularly.
Working capital:
All businesses need money to meet short-term needs, but having too much cash on handat any given time means the company is wasting an opportunity to invest in futuregrowth. Keeping a close eye on working capital can help you figure out ways to freeup cash, use funds more effectively or learn to reduce dependence on outsidefunding, while getting a clear sense of the business’s liquidity. The formulais:
Working capital = Current assets -Current liabilities
Accounts receivable turnover ratio:
Businesses must be able to effectively bill and collect payments from their customersor clients. The accounts receivable turnover ratio measures how effectively theaccounts receivable department collects debt owed by clients. The higher the ratio,the better the company is at collecting payments, which makes it more likely to havecash on hand to make its own payments or invest in growth. A lower turnover ratiocan indicate illiquid customers, slow-to-pay customers or an inefficient debtcollection process — potentially stunting a business’s growth. Theformula is:
Accounts receivable turnover ratio= Net credit sales in a given period / Average accounts receivable ofperiod
Percentage of accounts payable overdue:
It’s not only important to keep track of accounts receivable; it’s alsokey to pay close attention to accounts payable. The percent of accounts payableoverdue can indicate cash flow problems — the more overdue payments, the morelikelythe business is having trouble paying suppliers, indicating a need for funding or anew business strategy. The lower the percentage, the better a company is at payingits debts on time.
Accounts payable overdue rate =(Accounts payable overdue / Total accounts payable) x 100

SaaS Metrics to Track

Many important SaaS metrics overlap with key marketing and sales metrics. For example, churnrate, customer acquisition cost, customer lifetime value and customer retention are allextremely important for SaaS companies, given that the subscription-based business modelrelies heavily on keeping customers, not just acquiring them. Additional metrics that canprovide actionable insights for SaaS companies include:

Monthly recurring revenue (MRR):
A key metric for SaaS companies, MRR is essentially a summary of all the revenue youexpect to receive in a month. To calculate MRR, simply add up total revenue frompaying customers in a given month. However, more complex SaaS businesses generallyneed to factor in additional MRR calculations. For example, it’s a goodpractice to calculate the MRR of new acquisitions in a month, as well as“expansionMRR” from existing customers who upgrade their accounts or add new productfeaturesand/or users, and “churn MRR” — the monthly revenue lost fromdowngrades orcancellations. Tracking MRR metrics can help you better understand revenue changes,how well sales teams are doing and whether customers are satisfied or dissatisfiedwith your service.
MRR = Total revenue from payingcustomers in a given month
If you have 50 customers paying $500/month and 50 customers paying $1,500 a month,your MRR for that month would be (50 x $500) + (50 x $1,500) or $100,000.
New MRR = Total number of newcustomers in a month x Revenue brought in by new customers in month
If you’ve added 50 more customers in a given month, 25 of whom pay $500/monthand 25 of whom pay $1,000/month, new MRR for that month would be: (25 x $500) + (25x $1,000), or $37,500. Gaining new customers is key to revenue growth.
Expansion MRR = Total number ofcustomers who upgraded in a month x (New revenue - Old revenue)
If 10 customers upgraded from $500/month plans to $1,000/month plans, your expansionMRR would be $5,000, or 10 x ($1,000 - $500). In other words, you’ve expandedyour revenue without having to add new customers.
Churn MRR = Total number ofcustomers who canceled or downgraded x Lost revenue
If three customers canceled their $500 subscription and two customers downgraded froma $1,000/month plan to a $500/month plan, your churn MRR equals (3 x $500) + (2 x$500), or $2,500. Significant churn indicates customers may be dissatisfied withyour service.
Average revenue per account (ARPA):
Also known as annual revenue per unit (ARPU), ARPA measures the average revenuegenerated by each account, usually on a monthly basis. It’s important to haveaccess to your billing or accounting system in order to accurately calculate ARPA.Tracking ARPA can help give you a sense of how your revenue evolves over time. SomeSaaS businesses might track the ARPA of long-term customers and compare it with theARPA of new customers to see whether new acquisitions have different purchasingpreferences, providing insight into how customers use and perceive your product. Theformula is:
ARPA = MRR / Total number ofcustomers in that month
If your monthly recurring revenue is $100,000 and you have 200 customers, the averagerevenue per account is ($100,000 / 200), or $500.
Customer engagement score:
Customer engagement scores can help you understand how much and how often yourcustomers engage with your SaaS solution, such as how often they log in, how oftenthey use specific tools and features, what they use the software for and more. Forexample, if a customer regularly uploads files and uses various features throughoutthe day, they’re far more engaged than a user who simply logs in once a day tocheck reminders or alerts. By tracking customer engagement, you can better predictcustomer churn and be proactive about creating solutions to retain valuablecustomers.
There’s no one formula to calculate a customer engagement score, so a businessmust create its own model and system to do so. Create a list of inputs or actionsthat predict customer engagement, perhaps based on habits of long-term customers.Then score each input or action based on how critical it is to customer retentionand add up each customer’s engagement score. Continually evaluate your ratingsystem to ensure you’re appropriately picking the right features that predictretention and churn.
Net Promoter Score (NPS):
NPS estimates the likelihood users will recommend your service to others. It’sparticularly important for subscription businesses because their financial healthdepends on retaining as many customers as possible — and, preferably, gettingthemto upgrade and/or refer the product to colleagues and friends. NPS is usuallymeasured through a one-question survey to customers: “How likely are you torecommend us to a friend or colleague?” with a 0-to-10 scale (where zero meanstheywon’t recommend your product and 10 means they definitely would). Respondentsare then bucketed into the following categories:
- Detractors, or respondents who answer with a 0 to 6.
- Passives, or respondents who answer with a 7 or 8.
- Promoters, or respondents who answer with a 9 or 10.
To calculate:
NPS = Percentage of promoters -Percentage of detractors
For example, out of 100 survey respondents, 20 are detractors, 50 are promoters and30 are passives. Your NPS would be 30 (50% - 20%).

Human Resources Metrics to Track

Human resources metrics can help indicate employee satisfaction and performance. Thesemetrics generally track data related to employee turnover, development and engagement,company culture and training costs — all of which can help you spot workforce trendsanddynamics and proactively solve potential issues, like burnout or ineffective trainingprograms. Key HR metrics to track include:

Employee turnover rate:
Every company will lose employees from time to time, but the less turnover, thebetter. High turnover rates can reflect talent management issues, unhappy workers ora pattern of hiring employees unfit for their positions. In general, an averageturnover rate between 10% and 20% is little cause for concern, but numbers vary bybusiness and by industry. Turnover rates higher than industry average suggestcompetitors may be more attractive for employers. Note that turnover can bevoluntary or involuntary, and it’s important to measure both to track howoften employees leave on their own accord and how often they are let go. Somebusinesses may also benefit from calculating the turnover rate for high performers.
Turnover rate = (Number ofseparations in a given period / Average number of employees in period) x 100
Revenue per employee (R/e):
Sometimes regarded as a sales metric, revenue per employee is important in the HRcontext because it can help you get a read on the productivity of your entireworkforce. The more revenue per employee, the more productive a business is and themore likely it’s efficiently using resources — both of which candirectlyrelate to greater profits. However, revenue per employee will differ greatly acrossindustries, so it’s important to only make comparisons with businesses similarto your own. An online bank, for example, might have far fewer staff than abrick-and-mortar bank chain requiring staff at each location. To calculate:
Revenue per employee = Totalrevenue / Current number of employees
Employee net promoter score (eNPS):
eNPS is an effective measure of employee satisfaction. Like the traditional NPS, eNPSoffers a standardized approach to understanding how employees feel about thecompany, using a scale from 0 to 10. However, eNPS measures the likelihood that anemployee would recommend your company as a place to work, or the likelihoodthey’d recommend your products to family or friends. Again, scores of 0-6 aredetractors who are unlikely to recommend, 7-8 are passives and 9-10 are promoterswho are highly likely to recommend your company. The formula is:
eNPS = Percentage of promoters -Percentage of detractors
Training spend per employee:
Companies should track training expenses to see whether they’re getting areturn on their investment. For example, companies with high turnover ratios may beinvesting more in training an employee than the revenue that employee generatesbefore they leave the company. Similarly, tracking training expenses alongsideemployee productivity and profitability can help a business determine whethertraining strategies are effective. The formula is:
Training spend per employee = Totaltraining expenses / Total number of employees
Career path ratio:
This metric helps track the ratio of vertical promotions to lateral transfers. Thisis important for both employees and businesses. If companies want to promotelong-term job satisfaction, employees generally need room to grow and learn newskills, whether it’s via vertical promotion or applying for a lateral move.For companies, turning inward to find talent can be more cost-effective thanrecruitment. Tracking career path ratio can help a company measure employeemobility. The formula is:
Career path ratio = Totalpromotions / (Total promotions + Total transfers)
Values above 0.7 indicate more vertical promotions, meaning the organization may begetting too “top heavy” and should look to start expanding roleslaterally. Valuesunder 0.2 indicate more lateral transfers, suggesting not enough employees are beingprimed for promotion.

Other Business Metrics to Track

To provide a sense of the sheer volume of business metrics available, here are a fewadditional metrics that can be useful for the C-suite, inventoryteams, manufacturing companies and other business departments and industries.

Revenue vs. forecast:
Executives and other top-level managers can benefit from monitoring metrics thatreflect overall business health, such as comparing actual revenue to forecastedrevenue. This metric can help executives see whether company performance is matchingexpectations or coming up short. If actual revenue is falling short of expectations,executives must act to find out what’s causing the disconnect. To quantify thevariance, companies can use this formula:
Variance Percentage = ((Actual -Forecast) / Actual) x 100
Inventory turnover rate:
A crucial financial metric formanufacturing and retail companies, inventory turnover rate tracks how manytimes a company sells and replaces its inventory over a given period. The higher thenumber the better, because it means the company is holding less inventory —andholding inventory is expensive. A higher number also generally indicates healthydemand. However, if a high inventory turnover rate is accompanied by lost sales dueto item unavailability, the company is probably running too lean. The formula is:
Inventory turnover rate = (Cost ofgoods sold / Average inventory) x 100
Scrap:
Measuring scrap, or waste, is a key metric for manufacturing teams. Specifically,scrap measures the amount of rejected or unusable manufactured items, usually due tomanufacturing defects. Scrap can’t be reworked and may not be recyclable.Depending on the materials used to produce an item, scrap can either be measured asvolume, weight or individual units. The formula is:
Scrap = (Total scrap units, volumeor weight / Total product run in units, volume or weight) x 100
The less scrap, the more effective the manufacturing process.
Return on assets (ROA):
ROA calculates the per-dollar profit a company makes on its assets and is used toassess profitability. This is a particularly important metric for the bankingindustry because bank assets largely consist of money that is loaned, making cashflow harder to analyze than other types of businesses. The formula is:
Return on assets = Net income /Total assets
The higher the ROA, the more efficient a company is with its assets. However,it’s important to note that bank ROAs generally hover around 1% — whichisstill considered a healthy number for the industry. This is because banks often havemore debt than equity.
Average support ticket resolution time:
A key metric for customer service departments, average support ticket resolution timetracks how long it generally takes to resolve support tickets. Although responsetime is also important, resolution time is a better metric because a shortresolution time typically will indicate quick responses as well. Support teamsshould strive to have fast resolution times in order to keep customers satisfied.
It’s useful to continually track resolution time metrics in a chart over time.Any spikes can be investigated — perhaps a team member was on vacation, or ittooktime to patch a software bug.
Customer satisfaction:
Like employee satisfaction, customer satisfaction is critical to a successfulbusiness. One way to measure customer satisfaction is through a CSAT, or customersatisfaction, scale. These are typically simple questions that follow up on a singlecustomer experience: “On a scale of 1 to 10, how satisfied were you with Xexperience?” with 1 being extremely unhappy and 10 being extremely happy.Businessesthen add up all the scores and divide that figure by number of respondents to arriveat a customer satisfaction value. The higher the number, the more satisfiedcustomers are with the experience. Findings can be used to address potential issuesor reinforce effective practices.

Tracking Business Metrics With ERP

As businesses grow, they need to track more and more business metrics to ensure they achievehigh performance over the long term. At a certain point, an ERP solution such as NetSuiteERP will play a leading role in helping the organization stay on top of the metricsthat are most important. Because ERP systems contain data that spans a company’s corebusiness operations, they make it easier to generate real-time metrics, often through visualdashboard formats tailored to each executive. This empowers teams to track importantmetrics, absorb their meaning rapidly and intervene, as needed, in real time. For example,by sending an alert when inventory falls below a particular level, a manager can issue apurchase order before a stockout nears, thus proactively improving inventory turnover rate.

Also, by organizing and improving business processes, ERP solutions make it easier for acompany to deliver products or services more effectively and efficiently. Improvements ofthis kind can generate satisfied and loyal customers, which grows the bottom line, theultimate goal of any business.

Business metrics help companies track such things as revenue growth, average fixed andvariable costs, break-even points, cost of selling goods, contribution marginratio and profits. They provide a means of measuring business or departmentalactivities or tasks over a given period of time and reflect the ways different departmentswithin a company interact with and affect each other. Choosing the right metrics, andchoosing the right number of metrics, is important to the long-term success of any growingbusiness.

#1 Cloud ERP
Software

Free ProductTour

Business Metrics FAQ

What are key metrics in business?

Key metrics in business are the numbers you track to make sure your business is doing as wellas it can. They help businesses achieve goals and determine where improvement is needed.

How are metrics used in business?

Business metrics help companies track things such as revenue growth, average fixed andvariable costs, break-even points, cost of selling goods, contribution margin ratio andprofits. They provide a means of measuring business or departmental functions over a givenperiod of time and reflect the ways different departments within a company interact with andaffect each other.

What are the 5 key performance indicators?

Opinions differ and vary from one business to the next, but many agree that five of the mostimportant KPIs include sales revenue, customer acquisition costs, customer churn, customerengagement and customer satisfaction.

What is an example of a business-related measurement?

Examples of business-related measurements include metrics like sales quota attainment or netprofit margin. Sales quota attainment measures whether salespeople are meeting their salesquotas, which can directly affect a business’s bottom line. Net profit margin measureshow much actual profit each dollar of revenue yields, which is particularly importantbecause revenue increases may not always translate into increased profitability.

What Are Business Metrics? 35 Metrics Businesses Need to Track (2024)