Measuring Business Success: What Metrics to Use?

ROI is a popular metric used to decide if an initiative is worth investing time or money. Knowing how many conversions you get each month is great, but you also need to understand the speed at which these conversions occur. To do this, you have to look at the data in a meaningful way. The most basic conversion rate is the number of conversions divided by the number of visits.

For example, if you received 100 orders and 1000 visits, your conversion rate would be 10%. However, this may not be the best way to measure your conversion rate. It's possible that half of those orders come from retailers who buy every time they visit your site. If you segment them out, you'll have a more accurate idea of how often your visitors generally convert.

What if your site has multiple purposes? Maybe half of your site is dedicated to educating people and the other half to selling your product. In this case, that 10% conversion rate probably isn't a true indicator of your success. You can get a better picture if you create a segment that only looks at visitors who saw a product. The key here isn't to make the numbers look better or worse than they are. It's to make the data more usable.

Once you discover an actual conversion rate, you can start making informed changes. If you're seeing the wrong numbers, you might be making changes that don't make sense. If you just look at the bounce rate comprehensively, it won't tell you much about anything. Yes, it will tell you that 47% of last month's visits resulted in a rebound. But what does that mean? Does it mean that 47% of visitors hated your website? Probably not, but you can never tell by that number alone.

To get something out of the bounce rate, you need to break it down and see which pages have the highest bounce rate. If your total bounce rate is 47% but your home page has an 85% bounce rate, then maybe the home page experience is lousy. You can also look at the bounce rate by device type or browser. If 75% of visits from mobile devices cause a bounce, while only 25% of visits from computers do so, you may have a problem with mobile usability. That's data you can actually use.

Don't use the bounce rate as a universal indicator of how satisfied people are with your website. Use it as a tool to make adjustments to your site and marketing campaigns. Measures for business success can be divided into financial metrics and non-financial metrics. Financial metrics can be expressed in monetary value, while non-financial metrics cannot. Small businesses can use measures for business success.

All methods require meticulously measuring and tracking operational performance, and that can't be done without business metrics. Opinions differ and vary from company to company, but many agree that five of the most important KPIs include sales revenue, customer acquisition costs, customer loss, engagement, and customer satisfaction. CEOs are likely to closely monitor only a handful of summary metrics extracted from the control panels of each of their direct reports. The percentage of overdue accounts payable can indicate cash flow problems: the more late payments, the more likely the company is to have trouble paying suppliers, indicating the need for funding or a new business strategy. Choosing the right metrics and choosing the right amount of metrics is important to the long-term success of any growing company. Business metrics help companies track aspects such as revenue growth, average fixed and variable costs, break-even points, the cost of selling products, the contribution margin ratio, and profits. Revenue per employee, which is sometimes considered a sales metric, is important in the context of human resources because it can help you gain an idea of the productivity of your entire workforce. Financial metrics will focus on the company's financial results, while non-financial metrics will be associated with the social aspects of the business. When it comes to evaluating performance, business executives can look a lot like baseball scouts of yesteryear who have been in the market for so long that they have developed an instinct to determine what statistics are most important. A company whose website receives visits from 500,000 people in a month, of which 5000 become potential customers, has a traffic-to-potential ratio of 1%.

Executives and other high-level managers can benefit from monitoring metrics that reflect the overall state of the company such as comparing actual revenues to expected revenues. Companies have so many ways to market and advertise their products or services (direct mail, email, websites, and social media) that it's essential to know what combination works best. Of course, this isn't a measure of earnings but it's a great indicator of whether or not your ads are working. In addition, by organizing and improving business processes ERP solutions make it easier for a company to deliver products or services more effectively and efficiently. It's best to calculate Customer Acquisition Cost (CAC) for a period of time that covers your company's peaks and valleys (usually one year). They provide a means of measuring business or departmental functions over a given period of time and reflect the ways in which different departments interact and affect each other.