Businesses thrive on data. You need to be carefully tracking everything from the efficacy of your marketing campaigns to how much revenue you’re generating month-over-month.
When you’re trying to assess progress, growth, or even the status of your business’s financial well-being, however, you need to know exactly which data to focus on. Looking at everything all at once won’t help you make sense of anything, so you’ll need to know which specific metrics to focus on at any given point in time.
That’s where key performance indicators (KPIs) become invaluable for businesses.
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A Key Performance Indicator (KPI) is a metric that has been singled out to demonstrate how effectively a company is achieving key objectives.
KPIs are used by different teams in a company to evaluate the success of specific objectives.
Sales will focus on KPIs reflecting how many deals they’re closing successfully, for example.
Customer service teams will focus on KPIs around customer satisfaction.
Business owners and Chief Financial Officers (CFOs) will look at KPIs reflecting the revenue and growth of a business.
There are a staggering number of metrics for any team to review at any point in time, which is why KPIs are essential. When you’ve strategically and correctly chosen which data points to focus on, you’ll be able to better measure success over time.
The reality is that some data doesn’t matter much. Other data does matter, but isn’t important when you’re assessing progress toward and prioritizing a certain goal.
Here’s an example:
If marketing cares more about generating high-quality leads, for example, they’ll look at average order value, conversion rate, and pipeline velocity instead of customer acquisition costs (CAC).
This doesn’t mean that CAC doesn’t matter; they’ll still look at that information, too, because the cost of acquiring high-value customers absolutely does matter for a variety of reasons. It impacts scalability, for example, and is needed when calculating marketing budgets and developing strategies.
But it won’t be a KPI that they focus on as a core metric of success when assessing how much they’re progressing towards their goal of more high-cost sales faster. In fact, they may even be willing to spend more intentionally to reach those goals.
Paralysis by analysis is a real thing. You can get lost in the weeds if you don’t know what to focus on, which can end up causing you to miss business objectives by course-correcting in the wrong direction or missing vital information in the process.
SMART objectives are often used in business because they’re easy to understand and prioritize. They have the following traits:
Let’s say, for example, you want to gain 100 customers in the next 4 months by retargeting ads to customers who visited our landing page
We’ll measure KPIs like the following:
Throughout that 4 month period, you’ll want to check in regularly— at least monthly. Take a look at your KPIs to see how much you’ve progressed towards your goal. Note what you’re doing to achieve that goal, and consider whether or not you need to pivot.
You may realize, for example, that after month 1 you’ve only gotten 5 leads. Sometimes it takes time to build momentum with new campaigns due to pipeline velocity, so that’s not necessarily world-ending. But maybe it’s a sign you also want to test another version of your landing page, test a new audience, or increase your ad spend to boost visibility.
Each business (and each team within that business) will select its own KPIs based specifically on the goals in question.
Marketing teams, for example, often focus on metrics like the following:
Sales teams are going to look at metrics like these:
Customer service teams will look at metrics like the following:
When choosing your KPIs, do the following:
As a subscription-based business, there are certain revenue KPIs that you’ll almost always want to track to assess revenue. While it may vary depending on your specific business goals, these are typically the revenue KPIs that subscription businesses need to track:
Many subscription-based businesses also want to keep a close eye on customer satisfaction and engagement rates to find ways to increase their revenue by improving the customer experience. These KPIs can help you measure customer satisfaction:
You can’t track progress if you don’t have the right tools in place to collect the data you need for your KPIs.
Measuring KPIs comes down to using the right analytics software that has these core traits:
Baremetrics can help with this. We offer 26 different revenue and engagement metrics that are immediately relevant for subscription-based businesses. We also pride ourselves on consistency, reliability, and accuracy.
Unlike most other tools, for example, we don’t add customers with paused or delinquent accounts in your monthly recurring revenue metric; we only provide MRR for active, paying customers with accounts in good standing so you have an accurate look at your real revenue.
We’ll help you track data over time so you can assess KPI data, track growth, and spot opportunities for optimization.
We also offer forecasting features to help you plan for the future (which can help you determine new objectives and future KPIs, too), as well as specialized metrics that can help you actually meet your business objectives in and of themselves. Our Recover feature, for example, can help you recover failed payments to reduce churn before it happens.
Want to check it out? Get started with a free 14-day trial of Baremetrics now.
Setting and tracking KPIs strategically is the only way to effectively track how well you’re progressing toward your business goals.
It doesn’t matter whether your goal is to lower your customer acquisition costs or to acquire more customers faster— you need to choose the right KPIs to help you assess whether or not you’re actually making progress toward that goal. If you don’t, you risk either missing the forest for the trees by focusing on the wrong data or getting bogged down by just too much data.
The right analytics software makes KPI management and assessment much easier. Choose a tool that aligns with your immediate and future needs, and always prioritizes reliability above all else.
Ready to start setting KPIs so you can measure (and crush!) your goals? Get started with Baremetrics free here!