Essential Business Metrics Defined

As businesses grow and evolve, so do the metrics they need to measure success. Understanding these key performance indicators (KPIs) is critical for strategic planning and decision-making. From sales and marketing metrics such as Conversion Rate and CAC:LTV Ratio, to customer-focused metrics like NPS and Customer Churn, these indicators offer insights that can guide businesses toward growth and profitability. Additionally, understanding operational metrics like Average Lead Response Time or Sales Cycle can help in refining internal processes and improving efficiency. This article provides concise definitions of such vital business metrics, aiming to enhance your comprehension and use of these powerful business tools.

Average deal size: The mean value of all deals or contracts that a company closes over a given period.

Average inventory sold per day: The average number of inventory items sold each day within a specified time period.

Average lead response time: The average time it takes for a company to follow up with a potential customer after they’ve expressed interest.

Average Order Value (AOV): The average amount of money spent by a customer in a single transaction.

Average sales cycle: The average length of time it takes from the initial contact with a potential customer to closing the sale.

Bounce rate: The percentage of visitors to a website who navigate away after viewing only one page.

CAC:LTV Ratio: The ratio of the cost of acquiring a new customer (Customer Acquisition Cost, CAC) to the predicted total value of that customer over their lifetime (Lifetime Value, LTV).

Churn rate: The percentage of customers who stop using a product over a given period of time.

Click-through rate: The percentage of people who click on a specific link out of the total who view the link.

Closed-won opportunities by month: The total number of sales opportunities that have been successfully closed in a given month.

Closed-won deals: Sales opportunities that have been successfully converted into a sale.

Conversion rate: The percentage of users who take a desired action, such as making a purchase or filling out a form.

CPL to CLTV ratio: The ratio of cost per lead (CPL) to customer lifetime value (CLTV), used to measure the value of acquiring new customers.

Customer acquisition channels: The methods or platforms through which a business gains new customers.

Customer Acquisition Cost (CAC): The total cost of acquiring a new customer, including marketing and sales expenses.

Customer Churn: The number of customers who stop doing business with a company during a given period.

Customer Engagement Score: A measure of a customer’s interaction level with a brand or product.

Customer Health Score: An assessment of the likelihood that a customer will remain with a business over time, often calculated using factors such as product usage and customer feedback.

Customer Lifetime Value: The projected revenue that a customer will generate during their lifetime with a business.

Customer retention score: A metric used to gauge the likelihood of a customer continuing to do business with a company.

Estimated revenue by lead source: The projected revenue from different lead sources.

Funnel conversion rate: The percentage of prospects who move through each stage of the sales or marketing funnel, ultimately resulting in a sale or conversion.

Lead to Close Conversion Rate (CVR): The percentage of leads that result in a sale or a closed deal.

Lead-to-Customer Rate: The percentage of potential customers (leads) that end up making a purchase.

Leads by Lifecycle Stage: The distribution of leads at different stages of the sales process, from initial contact to final sale.

Leads in: The number of potential customers who have shown interest in a product or service.

Link CTR: The percentage of clicks a specific link receives out of the total number of times the link is shown (Click-Through Rate).

Loyalty rate: The percentage of customers who make repeat purchases or remain customers over a long period of time.

Marketing percentage of CAC: The portion of Customer Acquisition Cost (CAC) that is attributable to marketing efforts.

Marketing qualified leads (MQL) to sales qualified leads (SQL) conversion rate: The percentage of MQLs that progress to the SQL stage in the sales process.

Marketing Qualified Leads (MQLs): Potential customers who have indicated interest in a company’s product but require further nurturing before they are ready to buy.

Month-end inventory snapshot: The count of items in inventory at the end of a given month.

Monthly recurring revenue (MRR): The total amount of predictable revenue that a company expects to receive every month.

Months to Recover CAC: The time it takes for a company to earn back the Customer Acquisition Cost (CAC) through customer revenue.

Net profit margin: The percentage of revenue that represents a company’s net profit.

Net Promoter Score (NPS): A measure of customer loyalty and satisfaction based on the likelihood they would recommend a company’s product or service to others.

New leads by source: The number of potential customers generated from different marketing channels.

Opportunities by lead source: The number of potential sales (opportunities) arising from different sources of leads.

Percentage of closed-won deals: The proportion of total sales opportunities that result in a successful sale.

Percentage of time spent demoing: The portion of work time spent demonstrating a product or service to potential customers.

Percentage of time spent on the phone: The proportion of work time spent speaking with clients or potential clients on the phone.

Percentage of time spent performing data entry: The portion of work time spent entering or updating data in a system.

Pipeline creation by month: The number of potential sales (leads) entered into the sales process each month.

Pipeline velocity: The speed at which leads move through a company’s sales pipeline, often calculated as the number of deals times the average deal size divided by the length of the sales cycle.

Purchase Frequency: The average number of times a customer makes a purchase within a given time period.

Qualified Marketing Traffic: The portion of website traffic that is considered likely to convert into a lead or customer based on predetermined criteria.

Referral acquisition: The process of gaining new customers through referrals from existing customers.

Repeat purchases rate: The percentage of customers who have purchased more than once from a company in a given time period.

Return on ad spend: The revenue generated for every dollar spent on advertising.

Returning customer rate: The percentage of customers who make repeat purchases from a company.

Revenue Churn: The loss of revenue from existing customers who cancel or downgrade their subscriptions or recurring purchases.

Sales by product or product type: The number or value of items sold, broken down by product or product type.

Sales conversion rate: The percentage of potential customers who make a purchase.

Sales from new business: The revenue generated from sales to new customers.

Sales Qualified Opportunities (SQOs): Potential sales where the prospect has met certain criteria that justify a direct sales follow-up.

Shopping cart abandonment rate: The percentage of online shoppers who add items to their shopping cart but exit the site without completing the purchase.

Site traffic conversion rate: The percentage of website visitors who perform a desired action, such as making a purchase or subscribing to a newsletter.

Social engagement: The degree to which people interact with a brand on social media platforms, such as by liking, sharing, or commenting on posts.

Store sessions by device type: The number of user visits to a website, broken down by the type of device used (e.g., mobile, desktop).

Store sessions by location: The number of user visits to a website, broken down by geographic location.

Store sessions by traffic source: The number of user visits to a website, broken down by the source of the traffic (e.g., direct, referral, search engine).

Top products by units sold: The products with the highest quantity sold within a certain time period.

Total sales: The total revenue generated by a company from the sale of goods or services.

Web traffic: The amount of data sent and received by visitors to a website.

Metrics provide the critical numerical feedback businesses need to monitor their performance and make data-driven decisions. Understanding these various business metrics and their implications allows for more effective strategy formulation and implementation. Whether you’re analyzing your sales conversion rate, evaluating your customer health score, or measuring your pipeline velocity, each metric offers unique insights that can inform your next steps. Remember, while these metrics are essential, they are most powerful when used in combination to provide a holistic view of your business’s health and trajectory. The goal is not just to track these metrics, but to learn from them and use that knowledge to drive your business forward.