How do you feel seeing your company’s progress and all the profits you receive after much hard work? Let me tell you one thing. Profits are one of the main elements that affect your company’s progress.
To maintain your company’s progress, key performance indicators (KPI) help you assess your business’s success and build strategies to achieve your goals. As a business owner, you must keep track of your KPIs as they affect your company’s progress.
We have listed seven critical KPIs for small business owners to help you identify your business progress.
Gross Profit
The main element for every business is its profit. If your business spends more on suppliers and netting less in customer sales, it is time to change your business strategy. To determine your company’s profit margin, multiply your gross profit by 100 and divide it by your sales.
Keeping track of this KPI is extremely important as it will tell you how much profit you generate, contrary to the amount paid to suppliers. If your business’s profit margin increases, continue with your strategy. However, if you see a decrease, you need to reduce your company’s extra costs like utilities or wages or increase the cost of goods.
Flow In and Flow Out
It is one of the most important key performance indicators for small businesses. Flow in and out helps business owners assess whether their sales and margins are appropriate. The first step is to estimate your sales for each week and month. Once you know your sales history, estimate your payment timings and likely costs. Generally, this process covers 12 months, which is also called Cash Flow Forecast.
It also helps in tax preparation, new purchases, or identifying any cash surpluses. For example, if you plan to purchase any business equipment, you add the cost to your forecast. The new statistic will tell you whether purchasing the equipment will help your business make profits.
Revenue Ratio
A company’s revenue depends on the company’s profit or sales growth. If your business income or sale is increasing, it is obvious that the revenue rate is also increasing. To ensure your company is progressing well, check the difference between the current year’s revenue growth rates and the previous year’s.
Inventory Gross
Inventory gross tells the company how much inventory it has sold over time. Keeping track of your inventory is important, as it will help you plan any adjustments if needed.
Funnel Analysis
Funnel analysis lets you see how users move through a series of steps. It is a great way to track where users drop out – known as the funnel drop-off rate. It tracks the number of visitors who left the conversion process (the funnel). The conversion process depends on what type of business you run. Examples of conversion could be a shopping cart, subscriptions, and more. Once you identify where customers are dropping out, make strategies to boost your sales. In this technology age, many businesses rely on the internet as a sales tool, so funnel drop-off rate has become a key performance indicator to track.
Accounts Payable Rate
If you want your business to continue operating, ensure you have paid all your suppliers. Accounts payable measures the cost given to suppliers. It is hard for most business owners to track all their financial transactions. Hiring someone to oversee your bookkeeping will make your life easier and ensure no errors in your company’s accounts. This key performance indicator will help you identify whether you have to reduce the spending on suppliers to boost future profits.
Market Share
This KPI assesses a company’s success and position in the market. How is your business performing compared to your competitors? It is the only KPI that needs regular tracking. If you do not know how your company’s progress looks compared to others, changing its strategies and policies is impossible.
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