Business Success Metrics Every Leader Should Track

How do you truly evaluate the success of your organization? It’s not just in the smiles on your customers’ faces or the satisfaction of a job well done. Instead, business success metrics help you see exactly where you measure up. Read on to learn all about the most important business success metrics for improving your bottom line and keeping your customers—and your team—happy. 

Business success metrics are measurable data points that help you track performance in a specific work area. These metrics, sometimes called key performance indicators (KPIs), track everything from revenue to customer satisfaction. Business success metrics cut down on guesswork and tell you exactly where your organization is prospering—and where you need to improve. 

Why business success metrics are important for your team to track 

Business success metrics give you data and support for making concrete changes that help your business grow. Success metrics simplify benchmarking so that when your team members identify team and individual goals and tasks, they can tie them to performance. 

Consistently tracking success metrics streamlines just about everything. For example, you can use success metrics to prove that an approach works for your team and replicate it for similar tasks. If you hold quarterly one-on-one meetings with your supervisor, you can also use KPIs to show how close you are to achieving your annual goals. And if you need sales data in a team meeting, consistently tracking metrics means you can pull up those numbers on demand. 

Important business metrics to track

Business success metrics often fall into the groups below. If you’re trying to find the right metrics for your team to track, start with the categories most relevant to your team.

• Financial metrics
• Customer-related metrics
• Market performance metrics
• Operational metrics
• Employee-related metrics
• Social media and branding metrics

Financial metrics

Financial performance is often the biggest measure of an organization’s success. When you’re meeting to discuss cost management and budget, Fellow’s finance meeting agenda templates keep you organized. Financial conversations are also much easier when you have all the cold, hard financial facts. Below, you’ll find the top financial metrics that organizations like yours typically prioritize. 

• Revenue. Predicting incoming revenue is essential for budgeting and forecasting. Most organizations track revenue on a monthly basis via simple recurring financial reports that record outbound or paid invoices. With a year’s worth of monthly revenue data, it’s easier to predict busy and slow sales periods. This way, you can plan marketing strategies and order inventory accordingly. 
• Gross profit margin. This metric tells you how much revenue your organization is keeping after you’ve paid all expenses. To calculate this business success metric, subtract your cost of goods sold (COGS) from your revenue. Then, divide the difference by your revenue. 
• Operating margin. Similar to gross profit margin, this metric demonstrates how much revenue you’ve kept after paying your bills, but without accounting for interest or tax payments. You’ll find this figure by dividing operating income by revenue. If you’re trying to impress investors, this margin shows them how easy it is for your business to pay for non-operating costs. 
• Net profit margin. This metric is an important financial health indicator and demonstrates what percentage of net profit you’ve gained from incoming revenue. The formula to calculate net profit margin starts with subtracting your COGS from your revenue to find your net income. Then, subtract your operating expenses, interest, and taxes. Divide the result by your revenue to get your net profit margin.
• Return on investment (ROI). As its name implies, ROI indicates whether the amount you’ve spent on a business initiative has yielded significant revenue. ROI is an especially important metric for your marketing team to know whether they’re spending ad dollars in the right places. To calculate your ROI, subtract your amount spent from the resulting revenue, then divide the result by the amount spent. 
• Earnings before interest, taxes, depreciation, and amortization (EBITDA). This metric shows your organization’s underlying profitability and operating performance. To calculate it, add interest, taxes, depreciation, and amortization to your net profit. 
• Customer acquisition cost (CAC). To see how much it costs your team to bring on a new customer or client, add all the expenses associated with your acquisition strategy. This includes marketing campaign costs, overhead costs, salaries for marketing and sales team members, and the cost of software or consulting services. Then, divide this total by the final number of new customers gained in the period you’re measuring. 
• Customer lifetime value (CLV). How much is a loyal customer worth? You can answer this question using the CLV metric. Multiply the average amount a customer spends by the average frequency of their purchases, then multiply that total by your average customer lifespan. 
• Debt-to-equity ratio. The most common way to calculate this ratio is to divide your debt by your shareholder equity. This ratio is another important metric for investors since it shows whether your revenue covers your expenses or you need more debt to pay them. 
• Current ratio. If you want to understand how quickly your organization can cover its short-term expenses, track your current ratio. It’s the ratio of all your current assets to all your current liabilities. 
• Quick ratio. This metric is also a measure of how rapidly your organization can cover its short-term expenses. However, the quick ratio is based on your assets that are already liquid (that is, easy and fast to convert to cash). You’ll add up your quick assets, including cash equivalents, net accounts receivable, and marketable securities, and then divide this sum by your current liabilities. 
• Inventory turnover. How quickly are you selling your inventory? Divide your COGS by your average inventory value for a specified period. A higher inventory turnover ratio can indicate that you’re making plenty of sales. 
• Accounts receivable turnover. This metric indicates whether you’re collecting invoice payments in a timely manner. To calculate it, divide your net credit sales (that is, the amount invoiced) by your average accounts receivable (that is, the average total invoiced amount awaiting payment).

Customer-related metrics

Your customers are your greatest asset, no matter your industry. Customer-related metrics help you understand what does and doesn’t inspire people to keep coming back to your organization. If you’re trying to boost customer satisfaction, you can use these metrics to inform your team’s customer success objectives and key results (OKRs). 

• Retention rate. How many of your customers remain loyal to your organization after their first purchase? To find your customer retention rate, start with the number of new customers gained in a certain period. Subtract that figure from your total customers at the end of that same time frame, then divide the figure by the number of customers you had at the beginning of that time period. 
• Churn rate. No one wants to lose customers, but if you know your churn rate (or customer attrition rate), you’ll be closer to knowing why this happens. Simply determine the number of customers who stopped making purchases during a period. Then, divide this number by your total number of customers during this same period. 
• Conversion rate. Are your marketing efforts moving customers from one step to the next in your sales funnel? To determine your conversion rate, decide which engagement metric you want to track. If you’re tracking actions, you can look at how many purchases were made after you sent a promo code to your email list. Divide that number by the total number of people who received or read your email to determine your conversion rate. 
• Net promoter score (NPS). If you want to quantify customer satisfaction, NPS is a tried and true business success metric. It measures how likely a customer is to recommend your business to a friend. Survey your customers about whether they would refer someone else to your business using an NPS tool. Then, figure out what percentage of people would recommend your business and what percentage wouldn’t. The difference between these percentages, once you drop the percent sign, is your NPS. 

Market performance metrics

How does your organization compare with its competitors? It’s important to have this data ready at your next organizational strategy meeting, so you know how you measure up. The primary market performance metric to look at is your market share. To calculate it, divide your organization’s total sales revenue by your industry’s total sales revenue.  

Operational metrics

As a manager, you know full well that every second of your team’s time is precious. You always want to run focused, productive meetings, and when they’re over, you want your team to get to work right away. Measuring operational efficiency can help your team move forward. To calculate this metric, which reflects how well your team uses its time, add your operational expenses and COGS. Then, divide that number by your net sales. 

Employee-related metrics

Your operations can’t move forward without your team members. If your team isn’t happy and is, instead, looking for greener pastures, you’ll wind up spending precious time and money finding and training new hires. The below employee engagement metrics can help you cut down on the costs of employee turnover. 

• Employee satisfaction (eNPS). If you want a concrete sense of how much your team members are thriving, the eNPS metric is a good indicator. You can use employee surveys to determine this, just like how you determine customer satisfaction via NPS. Subtract your percentage of unhappy employees from your percentage of happy employees to determine this value.
• Turnover rates. To determine your turnover rate, confirm how many employees left your organization within a certain timeframe. Then, divide this number by your total team members employed at the beginning of that period. 

Social media and branding metrics

Your social media strategy is vital to attracting new customers and continually engaging existing customers. Track how much attention your content is getting with social media engagement. To determine this metric, divide your total content interactions (not impressions—only comments, likes, or shares) on a social platform by your number of followers. You can typically find your interaction counts within your social media platforms’ analytics suites.

Parting advice 

Ensuring your organization’s success can’t be left to chance. Tracking business success metrics is essential for every aspect of your business, from growing revenue to keeping turnover low. Focus on the metrics that are most relevant to your business, and make a habit of tracking them consistently. This will save you time and shine a light on where your attention is needed the most. 

To ensure you’re making the most of your metrics, use Fellow’s OKR tools and tie these numbers to your team’s goals. When you combine success metrics and efficiency tools, you’ll grow your bottom line in no time.