Financial KPIs every small business should track

Photo by Mikhail Nilov / Pexels

Financial KPIs every small business should track

As a small business owner, keeping track of your financial performance is crucial for making informed decisions about your company's growth and development. However, with so many financial metrics to consider, it can be overwhelming to know where to start. In this article, we'll break down the essential financial KPIs (Key Performance Indicators) that every small business should be tracking, and provide practical advice on how to get started.

Revenue and Sales Metrics

• Monthly Recurring Revenue (MRR): Track the total revenue your business generates each month from recurring sources, such as subscriptions or memberships. This metric helps you understand your business's stability and predict future growth.
• Customer Acquisition Cost (CAC): Calculate the cost of acquiring a new customer, including marketing and sales expenses. This metric helps you optimize your sales and marketing efforts.
• Customer Lifetime Value (CLV): Estimate the total value a customer will bring to your business over their lifetime. This metric helps you understand the potential value of each customer and prioritize retention efforts.

Expense and Cash Flow Metrics

• Burn Rate**: Calculate the rate at which your business is consuming cash reserves. This metric helps you understand how long your business can sustain itself before needing additional funding.
• Accounts Payable (AP) and Accounts Receivable (AR): Monitor the amount of time it takes to collect payments from customers and pay bills to suppliers. This metric helps you manage cash flow and avoid late payment fees.

Profitability and Efficiency Metrics

• Gross Margin**: Calculate the difference between revenue and the cost of goods sold. This metric helps you understand your business's pricing power and optimize profit margins.
• Operating Expenses as a Percentage of Revenue**: Monitor the percentage of revenue spent on operating expenses, such as salaries and rent. This metric helps you optimize cost management and improve profitability.

Putting it all together

Tracking financial KPIs is crucial for small business success, but it can be overwhelming to know where to start. At OpenShift.work, we're here to help. Take our free business quiz to identify areas for improvement and get personalized advice on how to get started.

By regularly monitoring these essential financial KPIs, you'll be able to make data-driven decisions, optimize your business operations, and drive growth. Remember, every small business is unique, so it's essential to tailor your KPIs to your specific needs and goals.

Get started today

Try our free business quiz at openshift.work/quiz to identify areas for improvement and get personalized advice on how to get started. With OpenShift.work's AI-powered platform, you'll have access to expert guidance, templates, and tools to help you launch and grow a successful business.