When you run a small business and you’re the one spinning all the plates, you might assume that you’ll always know exactly how your business is performing. Unless you’re monitoring some key business metrics, however, you’re probably not seeing the full picture.
Don’t be put off by the technical term. Business metrics are often simple to track and can offer crystal-clear insights. Here’s a beginner’s guide to unlocking the secrets of your own business performance.
What are business metrics?
A metric is a system for measuring something, and a business metric is used to measure business performance. Business metrics are usually numerical, but that doesn’t mean they always have to be financial. Metrics could range from your average profit margin to your number of Instagram followers. Whether financial or non-financial, business metrics can help you pinpoint where your business is doing well and show you where there’s room for improvement.
What’s the difference between a business metric and a KPI?
All KPIs (key performance indicators) are business metrics, but not all business metrics are KPIs. Business metric is a broad term that encompasses lots of different ways of measuring a business’s performance. A KPI, however, is just as its name implies - a metric that you’ve identified as being key. A KPI is a trackable measure that will help you measure the success of your business.
Which business metrics should I be monitoring?
There’s no hard and fast rule as to which business metrics you should be tracking - it really does depend on the unique setup of your business. However, there are some metrics that the vast majority of businesses will find useful. Here are a few examples that could help you unlock some new insights into your business performance:
Cashflow is the amount of income your business has received over a period of time, minus the amount spent by your business over the same time. This common metric can provide a crystal-clear insight into your business’s health. Tracking your cashflow can be done in a spreadsheet, or accounting software like FreeAgent can do it for you automatically.
Keeping a watchful eye on your business expenses can help you save money, cut down on unnecessary costs and make sure that your business remains financially healthy. As well as making sure that you’re not breaking the bank, monitoring your expenses over time can help you spot trends and patterns.
For example, you might spot that the cost of heating your premises or home rises every winter, which could lead you to identifying ways to cut down on these costs, such as improved insulation. Try FreeAgent’s expense tracking functionality for a simple, no-fuss way to manage and monitor those all-important business expenses.
If you don’t do it already, tracking the number of hits you get on your business’s website is a quick and easy way to monitor how well you’re marketing your business. Websites built with tools like Squarespace and WordPress often include built-in tracking that helps you monitor data such as how your website visitors arrive at your site, how long they spend on it and what pages they look at.
Tracking something as simple as your number of website visitors over time will give you a clear picture of how many people you’re reaching, and whether there might be room for improvement in your marketing strategy.
Try a 30-day free trial of FreeAgent and find out how our award-winning accounting software can give you the insights you need to make smarter business decisions.