11 types of small business metrics you should be tracking

Key takeaways

• Keep close tabs on financial metrics like cash flow, revenue, and profit margins to make informed business decisions
• Generate new leads and keep customers happy while managing your budget by tracking your customer acquisition costs, customer lifetime value, and satisfaction rates
• Streamline operations and build effective sales and marketing campaigns by tracking metrics like engagement, conversion rates, and operating expenses

Research shows about 20–33% of small businesses fail within the first two years, and close to 50% fail within the first five years. To be one of the success stories, it’s essential to know what’s happening at every level of your business. That means knowing which key metrics and key performance indicators (KPIs) to have your eyes on.

From cash flow to social media engagement, discover 11 small business metrics and KPIs to help improve decision-making and lay the foundation for business success. 

Small business metrics every owner should track

Leverage these small business metrics to find areas of improvement and discover new ways to drive business growth. In addition to broad metrics that provide insights on business performance and overall health, use KPIs that are tied directly to strategic business goals to measure performance based on a specific business objective.

Financial health metrics

Running a successful business means tracking financial metrics. From knowing your bottom line to monitoring cash flow, here’s how to ensure your business maintains a sound financial position.

1. Sales revenue

Critical for business success, sales revenue is the total amount of money you bring in for products and services. You can track total revenue for a broad overview of your business’s health. You can also track revenue for specific products to determine new services to offer, new products to develop, or whether to phase out old ones. 

You don’t need a fancy formula to calculate revenue. Simply use a spreadsheet or accounting tool to tally up sales. It’s helpful to track revenue on a monthly, quarterly, and yearly basis.

You should also keep an eye on sales growth rate. That’s how much sales have grown since the previous year. Tracked as a percentage or absolute amount, it gives you insight into how much the business has grown and helps you determine future potential.

2. Net profit and profit margins

A key indicator for a small business is how much profit you’re making. Gross profit is the amount of money you make after deducting expenses like the cost of goods to make your products or offer your services. Net profit is the amount of money you bring in after also subtracting operating expenses, taxes, and depreciation. 

Knowing your profit margins gives insight into operational costs and long-term business profitability. You can easily see how the price of raw materials and labor affect your business. These important metrics also offer insight into cost control and pricing strategy so you can maximize your return on investment.

3. Cash flow

Small business owners should know how much money is moving into and out of the company. Known as cash flow, this metric highlights everything from the amount of money coming in to current liabilities, debts, taxes, and expenditures. 

Cash flow is incredibly important whether you’re an entrepreneur launching a startup or nurturing a small business. In fact, 38% of startups fail because they run out of cash or capital.

Use a cash flow statement to document every penny that enters or leaves your accounts. By analyzing these numbers, you can identify areas of waste, like over-ordering supplies or paying for an expensive tool that you don’t use very often. Understanding your cash flow will help you spot places where you can spend funds more efficiently and decide when to scale down (or scale up) certain aspects of the business.

Customer metrics

An Adobe study found that seven in 10 customers are more likely to buy products from brands they know and trust. Knowing how customers engage with your products and what motivates your target audience can help you build better campaigns to keep them coming back for more.

4. Customer acquisition cost

Customer acquisition cost (CAC) measures the amount of money it takes for a business to get a new customer. It’s the total cost of all efforts including sales and marketing campaigns and equipment per customer. 

To calculate CAC, take the total cost of sales and marketing efforts and divide it by the number of new customers acquired. For example, if you spend $5,000 on sales and marketing in a quarter and get 500 new customers in that time period, your cost to acquire a customer is $10. 

5. Customer lifetime value

The customer lifetime value (LTV) is the amount an individual is expected to spend on products and services from your business throughout their life. Knowing this metric can improve decision-making when it comes to deciding if/when you should focus your efforts on generating new customer leads vs. servicing existing customers. 

Use this formula to calculate LTV: 

Average purchase value x number of purchases in 12 months x the average customer lifespan (in years)

6. Customer satisfaction

An excellent customer experience is critical to getting repeat purchases from existing customers and convincing new leads to buy their first product or service from you. In a recent market analysis report from Grand View Research, the customer experience management market was valued at over $12 billion in 2023—and it’s expected to grow by over 15% in the next several years.

Naturally, you want your customers to be satisfied not only because it’s a reflection of your product and services but also because repeat customers can help drive business growth. Track customer satisfaction (CSAT) by using tools like surveys to learn what customers have to say after using your products or to gauge how likely they are to recommend your business to others.

Use a customer relationship management (CRM) tool to keep tabs on your customer base metrics, including the acquisition costs and customer retention rate—the percentage of customers you keep over a set time period. You’ll also want to track customer churn rate (the percentage of people who stop using your business) as these numbers reflect your brand’s level of customer satisfaction.

Yelp tip: Claiming your free Yelp Business Page is another helpful way to see what customers are saying about your business. This feedback comes at no cost to you and can help you decide which parts of your customer experience to improve, maintain, or remove. 

Operational efficiency

Operations have the potential to power or derail your business. Keeping track of these key small business metrics helps you streamline processes and make data-driven decisions to reduce costs and improve resource allocation.

7. Payroll and cost of goods sold

Whether you’re a startup or an established small business, payroll and the cost of goods sold (called COGS) significantly impact your bottom line. These metrics represent the cost to produce a single product or provide a service.

Use a payroll tool as your team grows to easily manage costs like taxes, benefits, and salaries in one place. An accounting tool or team member can determine the COGS amount by adding the beginning inventory and purchases during a set period, then subtracting the ending inventory to get the final COGS amount.

Calculate the COGS for your business with this formula: 

COGS = (Beginning Inventory + Purchases) – Ending Inventory

8. Operating expenses

Operating expenses like overtime can lead to dramatically higher costs if you don’t keep a close eye on them. If your operating costs are higher than normal, consider making organizational changes to improve efficiency. 

For example, if your business requires delivering parts or goods, think about spreading shipments out over several days at a normal pay rate rather than paying drivers overtime.

Sales and marketing metrics

To drive business growth, you’ll need to increase the amount of money your business generates by attracting new customers and/or boosting sales growth with existing clientele. Use these sales and marketing metrics to assess the performance of your efforts and campaigns.

9. Website traffic and leads

As a small business owner, you’ve likely invested in a website with blog content or outreach on social media channels. However, it’s not enough to post content—you also need to track how well that content performs with your audience. That way, you can create the types of campaigns that draw engagement and skip those that don’t perform well.

An easy way to track the performance of your marketing efforts is to monitor traffic using a tool like Google Analytics, Semrush, or Ahrefs. This can include analyzing the number of people who visit your website, view your social media pages, or land on a page after searching for a specific keyword.

You’ll also want to track the number of leads you generate from your marketing strategy. A lead is an individual who has interacted with your brand and could become a potential customer. A tool like Zoho or Pipedrive can help you monitor your marketing campaigns and success rate.

10. Conversion rate

In addition to tracking the amount of traffic your site generates, you’ll want to know how many of those people are converting (taking a desired action)—like buying a product, making an appointment, or providing their contact information. 

To calculate conversion rates, take the number of conversions within a given period and divide that by the total number of interactions. Here are a couple examples:

• A roofing company posted a blog on how to know when you need a new roof. One thousand people viewed the blog post and 50 people sent a request for more information. The conversion rate of that post would be 5%.
• A hairdresser posted a social media ad announcing a discount for the holidays and an appointment link to secure the lower pricing. Two hundred people viewed the post and 25 made an appointment. That social media post had a conversion rate of 12.5%.

11. Engagement rate

Another key performance metric to track is how often your audience sees and interacts with your content, also known as the engagement rate. This includes the number of people who like, comment, or share a social media post. A good engagement rate is usually between 1–5%.

Customers tend to interact more with content they find useful or helpful. High-quality content tends to produce higher engagement rates, so this number highlights areas for improvement and areas where you’re doing well. Low engagement rates may also be a sign that you’re targeting the wrong audience.

Calculate engagement rates by taking the total of all interactions and divide it by the total number of followers and multiply that by 100. For example, a plumber posts a funny meme to his 5,000 followers and 100 people liked it, 50 people commented on it, and 25 people shared it. The total number of interactions is 175 so you divide that by 5,000 followers and multiply by 100 to get an engagement rate of 3.5%.

Build a successful business using key metrics and data

Use these small business metrics to get insights into all levels of your operations. By monitoring things like your financial metrics and marketing KPIs, you’ll have a clearer view of your company’s health so you can make data-driven decisions. Discover ways to grow your small business, from using automation tools that boost productivity to marketing and sales ideas that maximize revenue.