With an overabundance of available data, how do you know which numbers truly matter for your business? Making smart choices isn’t just about collecting data—it's about focusing on the right metrics.
Get lost in the sea of numbers, and you might find yourself stuck, overwhelmed, and even steering your business strategy in the wrong direction. So, which performance metrics are worth your time?
In this article, we’ve collected 29 core business metrics that every business leader should keep an eye on (depending on their role and responsibilities). We’ll also show you how to track key KPIs so that you can always pinpoint what’s happening inside your organization.
Benefits Of Tracking Core Business Metrics
It’s important to track metrics that are most relevant to your company’s performance and manage business processes based on their results. Here’s why:
- Insights for informed decision-making: If you’re unsure of your next move, data can help guide you in making the right choice. For example, tracking your cash flow will help you make calculated investment decisions so you don’t risk running out of liquid resources.
- Culture of clarity and accountability: Metrics create accountability so you know exactly who is responsible for certain business outcomes. For instance, when sales targets are clearly defined and tracked, employees understand their individual goals, fostering a sense of ownership.
- Fast adaptability: If you can’t see what’s really happening in your business, you’ll be too slow to react when necessary. For example, if you don’t understand the reason for the low revenue growth, you may lose your competitive edge and, eventually, market share. You must rigorously track and analyze important metrics to stay ahead of the market and your competitors.
📚Recommended read: Centralized Business Observability To Boost Your Bottom Line
Financial Metrics
Financial KPIs tell the story behind your company’s financial health and performance, helping you understand your profitability, efficiency, and liquidity.
Gross Profit
Also called gross income, this business metric is the amount your company makes after deducting the costs associated with making and selling your products or services.
A low gross profit suggests that the purchase or production costs are too high compared to the sales revenue. It can also mean that you’re not charging enough for your products.
Formula: Gross Profit = Sales Revenue – Cost of Goods Sold (COGS)
Gross Profit Margin
While gross profit quantifies the actual dollar amount of profit derived from your core operations, gross profit margin provides a percentage-based perspective.
This financial metric is the proportion of your gross profit to your total revenue and helps you compare your profitability to other similar companies.
Formula: Gross Margin = (Gross Profit / Revenue) x 100
Net Profit
Also called net income or bottom line, this metric encapsulates the amount of money your company ultimately retains after covering all expenses, including operational costs, taxes, interest, and other financial obligations.
A consistently low net profit might indicate inefficiencies, high expenses, or significant debt interest.
Formula: Net Profit = Total revenue - Total expenses
Net Profit Margin
Net profit margin, akin to gross profit margin, provides a percentage-based perspective, but this time it concerns the net profit relative to total revenue. It offers a deeper understanding of your company's profitability after accounting for all expenses.
Formula: Net Profit Margin = (Net Profit / Revenue) x 100%
Cost of Goods Sold (COGS)
COGS represents the direct costs associated with producing the goods or services your company sells. This includes expenses like raw materials, labor directly involved in production, manufacturing costs, and other direct overhead costs.
A high COGS reduces gross profit margin, indicating limited profit from core operations or issues like defects and inefficiencies in production.
Formula: Cost of Goods Sold = Beginning Inventory + Purchases – Ending Inventory
Customer Lifetime Value (CLV)
CLV is an estimate of the total revenue a customer is expected to generate for your business over their entire relationship with your company. A low CLV means customers aren’t staying with the company and don’t make repeat purchases.
Formula: Customer Lifetime Value = Average Revenue Per Customer X Repeat Transactions x Average Retention Time
Monthly recurring revenue (MRR)
MRR is common for subscription-based businesses since it represents the predictable, recurring revenue generated from monthly subscription fees of active users. Calculating MRR helps you gauge revenue stability and growth potential.
📚Recommended read: The Ultimate Operating & Financial Model Template (Free Spreadsheet)
Operational Metrics
The following operational KPIs will help you make data-driven decisions to optimize your operations.
Cash Flow
Cash flow is the measure of money moving in and out of a business over a specific time. It provides insights into your company's liquidity, showing if it has enough cash to cover expenses. A negative cash flow can lead to missed payments and potential business failure if left unmanaged.
Formula: Operating Cash Flow = Operating Income + Depreciation – Taxes + Change in Working Capital
Operating expenses
These are day-to-day business costs like rent, utilities, and salaries, not linked directly to production. Excessive operating expenses can diminish profits, threatening business sustainability. Identify where the bulk of your operating expenses are going and prioritize the ones that contribute directly to generating revenue and serving customers.
Capacity utilization
Capacity utilization measures the extent to which your manufacturing facility is using its production or operational capacity. It reflects how efficiently resources are employed and can indicate whether you’re underutilizing or overtaxing your facilities and equipment.
Formula: Capacity Utilization = (Actual Output / Maximum Possible Output) x 100%
Inventory turnover
This operational metric assesses how quickly you can sell your inventory within a specific period. A high inventory turnover rate indicates efficient inventory management and cash flow, while a low turnover rate may signal overstocking issues or a slowdown in sales.
There are two ways to calculate this metric:
Formula 1: Inventory Turnover = Cost of Goods Sold (COGS) / Average Inventory Value
Formula 2: Inventory Turnover = Total Sales / Average Inventory
Throughput
This metric represents the rate at which a manufacturing system produces its outcome. Low throughput can lead to customer service delays, driving clients to alternatives.
To improve throughput, eliminate bottlenecks, optimize workflows, and invest in automation to speed up tasks and minimize manual errors.
Formula: Throughput = Inventory / The time the inventory units spend in production from start to finish
📚Recommended read: The Ultimate Operating & Financial Model Template (Free Spreadsheet)
Sales Metrics
Tracking specific sales metrics helps you determine how well the sales teams are performing and if you’re on track to hitting your business goals.
Sales target
This is a goal set to achieve a specific sales benchmark within a certain time frame. It's based on revenue, units, or acquired customers and can be adjusted according to market conditions.
Win rate
Win rate, often expressed as a percentage, represents the ratio of won deals or sales to the total number of deals pursued.
A higher rate shows more success in closing deals. Boosting this rate can come from better sales team training, product value proposition understanding, and pitching.
Formula: Win Rate = (Number of Won Deals / Total Number of Deals Pursued) x 100%.
Pipeline
Sales pipeline refers to the visual representation of all qualified leads, sales opportunities, or deals at various stages of the sales process. It provides insights into the overall health and potential sales growth of the sales operation.
Sales Cycle Length
It's the time from initial contact to sale closure. A shorter cycle indicates quick lead conversions. If this lengthens, it can strain cash flow and efficiency. To cut down, train the sales team to spot and prioritize high-value leads.
Formula: Average Sales Cycle Length = Total No. of Days to Close All Deals / Total Number of Deals
📚Recommended read: Sales KPIs - The 12 Sales KPI Examples You Need to Track
Innovation Metrics
Innovation is at the core of every successful business that can survive changing market conditions. However, it’s not enough to innovate—you have to measure the outcome of your research and development (R&D) department.
R&D Expenditure
These are the financial resources allocated to research and development activities within an organization. It includes investments in innovation, experimentation, and the creation of new knowledge or technologies.
Innovation Rate
This metric is the frequency or pace at which you introduce new products, services, processes, or ideas.
Formula: Innovation Rate = Revenue share of innovations / Total Revenue x 100
Time to Market
This metric represents the duration it takes for a new product, service, or feature to go from concept or development to being available to customers or users.
If your time to market is taking longer than desired, you should review your R&D process and implement agile methodologies to accelerate the product development cycle.
Number of New Patents
This refers to the number of unique inventions or intellectual property assets you’ve secured during a specific period and reflects your commitment to R&D.
Number of New Products
This number quantifies the volume of new offerings or variations introduced in a given period. It offers insights into your innovation capacity and ability to meet evolving customer needs.
Human Resources (HR) And Employee Metrics
HR teams track dozens of KPIs depending on their specific roles. As business leaders, here are core HR KPIs that have the biggest impact on your organization’s success.
Revenue per Employee (RPE)
This efficiency ratio tells you how much revenue each full-time employee generates for your company over a period of time. If your RPE is decreasing, take action to boost the employee retention rate and consider other strategies to increase your company’s revenue (e.g. how to attract more customers).
Formula: Revenue per Employee = Total Revenue / Total Number of Full-time Employees
Employee Satisfaction
This metric presents a gauge of employee well-being, job satisfaction, and commitment. Low scores hint at morale issues, turnover, and poor culture.
Turnover Rate
This reflects the percentage of employees leaving, either by choice or otherwise. High turnover rates suggest issues with recruitment, retention, or workplace culture.
Formula: Turnover Rate = (Number of Employees Separated / Average Number of Employees) x 100.
📚Recommended read: HR KPIs - The 12 Key HR Manager KPI Examples
Customer And Marketing Metrics
Make informed marketing decisions and gather quantifiable insights on customer experience with these marketing metrics. You can also check out our guide on digital marketing KPIs for specific metrics for analyzing your digital marketing efforts.
Customer Acquisition Cost (CAC)
CAC represents the cost of acquiring a new customer, including marketing and sales expenses. A high CAC can strain your cash flow and negatively impact your profits. It can also raise questions about your business’s sustainability.
Tackle high CAC by segmenting and customizing marketing campaigns, and focusing on top-performing channels.
Formula: CAC = Total Sales and Marketing Costs / Number of New Customers Acquired
Customer Retention Rate
Shows the percentage of customers retained over time. Low retention signifies a lack of customer satisfaction and weak post-sale support.
Keep in mind that acquiring new customers is often more expensive than retaining existing ones. To avoid this, provide 5-star customer service during and after-sales.
Formula: Customer Retention Rate = ((Existing Customers – New Customers) / Initial No. of Customers) x 100
Conversion Rate
Measures the percentage of visitors who take desired actions, like purchasing or signing up for a newsletter, out of the total website traffic. Low rates suggest missed revenue opportunities and inefficient use of your marketing budget.
Understanding your audience, having clear call-to-action, simplifying sales processes, and showcasing trust signals—like customer reviews—to boost confidence in your product or service.
Formula: Conversion Rate = (Number of Conversions / Total Number of Visitors or Leads) x 100%.
Customer Churn Rate
This is the percentage of customers who stop using a product or service within a specified time frame. A high churn rate may signal issues with product quality, customer service, or competitive pressures.
Formula: Customer Churn Rate = (Customers Lost During a Period / Total Number of Customers at the Start of the Period) x 100%
Net Promoter Score (NPS)
NPS measures customer satisfaction and loyalty by asking customers a simple question: "On a scale of 0 to 10, how likely are you to recommend our product/service to a friend or colleague?"
📚Recommended read: Customer Service KPI Examples - The 12 KPI Metrics You Need to Track!
How To Track Your Key Business Metrics?
It’s easy to track key performance indicators with the right tools and systems. Here’s how:
Step 1: Identify Your Key Metrics And Set Targets
Determine business metrics that align with your objectives and are crucial for monitoring your business performance. These metrics can vary widely based on your industry and goals.
Establish specific, attainable targets for each KPI to aim for. These targets are like your bullseye, telling you exactly what you need to achieve.
📚Recommended read: How To Write KPIs In 4 Steps + Free KPI Template
Step 2: Collect all your data in one place
The heartbeat of KPI tracking begins with systematically gathering relevant data. Without this essential component, there’s no foundation upon which analysis and decision-making can stand.
With Cascade, you can automate the entire data collection process. Choose from over 1,000 data sources to save time and bypass the tedious manual procedures.
📽Watch this short and informative video on how to set up your Metrics Library in Cascade to centralize your business data.
Step 3: Monitor and analyze your key metrics
If you want to gauge an accurate picture of your strategic performance, you need access to real-time data. Static reports in spreadsheets and PowerPoint are no longer enough.
With Cascade’s dashboards and reports, you can monitor your key metrics and critical business and strategic information live. Drill down or create different data visualizations to present insights that power decision-making.
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Connect Your Metrics To Strategy With Cascade 🚀
Cascade serves as a vital bridge connecting your business metrics with your strategic goals, all in one centralized platform. This clear data-driven alignment ensures every metric you track contributes to your strategic objectives, enabling data-driven decisions and real-time adjustments when needed.
In a rapidly changing business landscape, Cascade's centralized observability enables clarity, accountability, and adaptability, ultimately leading to more effective and faster strategy execution.
Start today for free or book a 1:1 product tour with Cascade’s in-house strategy expert.
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