Have you ever wondered, “What should I really be tracking in my business? Which numbers actually have actionable value, and which numbers are simply good to know?”
Below is a list of key performance indicators (KPIs) I track daily, weekly, or monthly that you should likely be tracking as well. Of course, not all numbers apply to all industries. If you run across one that isn’t something you can track, either find your industry’s equivalent or skip it. But if you can track it in your industry and are simply being lazy, that’s no good — get on it.
An important note: Numbers are only good if they are valid and real. You need to double-check your math. For example, if you only have a 10 percent customer churn rate even though you don’t actively do anything to reduce churn, there is a good chance your math is off. For example, I once had someone boast to me about their 10 percent churn. After asking a few questions, I found out that they had 24-month contracts and had only been in business for 22 months. To add insult to injury, they had 28 total customers. The number alone appeared great, but with a little digging, it was easy to see that the churn percentage didn’t tell the whole story. Remember that these are your numbers, and the only person you hurt by not being real and honest on these numbers is you.
Churn
I talk about this one all the time. There’s a reason: you need to know how many customers leave your business in any given month. This is the minimum amount you need to get in the following month just to break even. By tracking this number weekly and monthly, you’ll start to see patterns behind when customers leave, and you can take proactive steps to reduce your churn.
You’ll also find holes in your systems and processes more easily when you know this number. Your churn rate tells you if your business is growing or dying far better than your sales numbers do. You should have a full understanding of your business’s churn rate and churn points.
Pipeline Revenue
This is used for anyone who gives a quote and closes business in the future. Pipeline revenue is the total sales volume you’d have if you won each and every piece of business you quoted over a given period of time. I look to the pipeline revenue number as a leading indicator of future sales. For example, if we need to produce $100K in new pipeline revenue to close $30K in sales the following month, and 20 days into the month we’re at $54K in new pipeline revenue when we should be at $67K, we’d better change something fast or we won’t hit our goal this month — and likely won’t hit it in the coming month, either.
Average Annual Revenue Per Employee
This is a great number to track. If I know your sales number and how many employees you have, I can do some simple math to get revenue per employee. Then I’ll know how healthy (or sick) your company is. Most companies with over $1 million in revenue will have a minimum of $100K in revenue per employee. It is not uncommon to see small businesses with $125K, $150K, or $200K-plus, depending on the industry. Most Fortune 500 companies have a minimum of $500K in revenue per employee. The more revenue per employee, the more effective your business is at maximizing its greatest resource: the people who work there.
This number can skew down a bit if you are at a stage in your business where you’re growing fast and hiring a lot of people. Otherwise, if you find your revenue per employee is under $100K, you are likely either overstaffed or the business is going to struggle to turn a good profit — or even survive.
Personally, I track churn and pipeline revenue weekly and average annual revenue per employee monthly. Armed with these numbers, you will be in a much better spot to be proactive in your business. You can solve minor problems before they ruin your month, quarter, or year.
