Small business KPIs are vital for business owners to know. However, many small business owners do not track these metrics. In small business, it is all about the numbers.
Growth isn’t just a goal—it’s a necessity. And the secret to that growth? It’s in understanding and tracking your business’s vital signs through Key Performance Indicators (KPIs).
Think of KPIs as the heartbeat of your business. Just as a doctor checks vital signs to gauge your health, KPIs help you measure the health and success of your business. Whether you’re looking to streamline operations, boost sales, or enhance customer satisfaction, it all starts with knowing your numbers.
In this article, we’ll dive into what KPIs are and explore the four critical KPIs every small business owner should have on their radar: Cost Per Acquisition, Booking Rate, Close Rate, and Average Ticket. By keeping a pulse on these metrics, you’re not just tracking numbers—you’re paving the way for your business’s growth and success.
Let’s get started by reviewing these key metrics, how they work, and how they can help you succeed as a business owner.
What Are KPIs?
KPIs, or Key Performance Indicators, are metrics that measure how well your business is achieving its key objectives. They serve as a quantifiable measure of performance over time for a specific objective. KPIs offer a clear view of your company’s operational and strategic successes and pinpoint areas needing improvement.
The primary purpose of KPIs is to provide businesses with actionable data that informs decision-making. They help business owners and managers understand whether their company is on the right path toward achieving its goals. By tracking these indicators, businesses can adjust strategies, allocate resources more efficiently, and improve overall performance.
Successful businesses use KPIs to guide their strategic and operational decisions. This practice is what often separates high-performing companies from their competition. For example, a business might track the Cost Per Acquisition to gauge the effectiveness of its marketing campaigns or monitor the Average Ticket size to determine if sales strategies are effectively upselling customers.
For small businesses, there are specific KPIs that can be used to help you grow your business. Let’s look at these specific small business key performance indicators, define them, and then look at some examples of how they can be used. Local and small businesses should utilize all aspects of digital marketing tools to adjust and track KPI’s.
The Four Crucial KPIs for Small Businesses
When running a small business, four KPIs stand out. Understanding and monitoring these metrics is important and can help enhance performance and profitability for your company.
Let’s look at these four key metrics:
Cost Per Acquisition
Total Marketing Spend / Total Number of Leads = Cost Per Acquisition
Cost Per Acquisition is our metric for measuring our cost to acquire a lead or potential customer. It takes the amount we spend on marketing efforts and puts that number into a cost per acquired lead.
Booking Rate
Total Intermediary / Total Leads = Booking Rate
Typically, most businesses will have an intermediary step, like a phone call appointment, an in-person appointment for a quote, or another intermediary step. The booking Rate is a percentage that we get when we divide the number of potential customers that took this intermediary step by the number of total leads. It shows us how many of our total leads are moving down the sales funnel to becoming customers.
If your business doesn’t have this step that’s ok, there are other ways to calculate what we need to, but most businesses have some intermediary steps.
Close Rate
Total Closings / Total Intermediary = Close Rate
Close Rate offers insights into the effectiveness of your sales strategy and customer interactions. This metric calculates the proportion of potential deals, customers who took the first intermediary step, that converted into sales. It’s a critical measure of your business’s ability to seal the deal.
Average Ticket
Total Revenue / # of Sales = Average Ticket
Average Ticket is our last small business KPI. It represents the average revenue of each customer. This KPI is vital for understanding the revenue potential of your customer base. It helps us see clearly how much our customers are spending, and how much we are charging, on average for our services.
Together, these four KPIs offer a comprehensive overview of your business’s performance from initial lead acquisition to final sales. However, these KPIs for small businesses can be used to dig deeper into our process, and our costs. They can help us understand how to better grow our business, how to be more efficient, and find areas to improve.
Let’s explore this idea of small business KPIs with a real-life example.
KPIs in Action: A Practical Example
To illustrate how these KPIs interconnect and influence business decisions, let’s consider a hypothetical scenario with a small business’s marketing campaign. This example will help clarify how tracking and analyzing these KPIs can offer actionable insights for growth.
Scenario: A small business allocates a $10,000 marketing budget to generate new leads. Here are their current, healthy, KPIs.
- Marketing Spend: $10,000
- Cost Per Acquisition (Lead): $50
- Booking Rate: 75%
- Close Rate: 50%
- Average Ticket: $1,000
Given this setup, let’s break down the numbers:
- # of Leads: The marketing spend divided by the cost per acquisition gives us the total leads generated.
- $10,000 / $50 = 200 leads
- # of Quote Apps (Bookings): Applying the booking rate to the total leads gives us the number of leads that progress to booking an appointment or quote.
- 200 * 0.75 = 150 bookings
- # of Customers: The close rate applied to the bookings provides the number of leads that turn into actual customers.
- 150 * 0.5 = 75 customers
- Total Revenue: Multiplying the number of customers by the average ticket size gives us the total revenue generated from this campaign.
- 75 * $1,000 = $75,000
Table Overview:
| Marketing Spend | CPA (Lead) | Booking Rate | Close Rate | Average Ticket | # of Leads | # of Bookings | # of Customers | Total Revenue |
|---|---|---|---|---|---|---|---|---|
| $10,000 | $50 | 75% | 50% | $1,000 | 200 | 150 | 75 | $75,000 |
Analysis:
This example highlights the effect each KPI has on the next, ultimately affecting the total revenue.
Now that we understand each step in the KPI funnel, we can begin looking for areas to improve, and we can see directly how that improvement will positively affect our business.
For instance, even a small improvement in the close rate or a modest increase in the average ticket size could lead to a substantial increase in revenue. Leveraging marketing as a strategy to boost your business’s revenue can be highly effective. Consider adopting revenue marketing for your small business, which focuses on directly connecting marketing efforts to revenue generation.
Now, lastly, let’s look at each of these KPIs, and what steps can be taken to improve low performance in each one.
Analyzing and Acting on Small Business KPIs
Understanding your KPIs is just the start. The real power lies in using this knowledge to pinpoint issues and opportunities within your business. Let’s look into each of these KPIs and how they can be improved.
- Cost Per Acquisition or cost to acquire a lead:
- Explore and invest in more cost-effective marketing channels like search optimization.
- Optimize your Google or PPC ad campaigns for higher conversion rates.
- Look for and test alternative marketing channels.
- Booking Rate or the number of leads that take a first step:
- Enhance the customer experience on initial contact.
- Implement faster response times to inquiries.
- Refine your value proposition to make it more compelling.
- Close Rate or the number of first-step customers that close:
- Provide additional training for your sales team on closing techniques.
- Introduce incentives or limited-time offers to encourage commitments.
- Follow up with prospects more effectively and personalize communication.
- Average Ticket or average revenue per sale:
- Bundle products or services to increase overall purchase value.
- Upsell or cross-sell to add value to the customer’s purchase.
- Raise prices!
By focusing on these specific areas, you can directly influence each KPI and drive meaningful improvements in your business’s performance. Specifically, for local businesses, Google Ads is an incredibly strong tool that can help your business thrive. Remember, the goal is not just to track these metrics but to use them as a guide for strategic action and business growth.
KPIs Are Your Key to Growth: Small Business KPIs
Tracking and analyzing KPIs are fundamental for any small business aiming to grow in today’s competitive landscape. The four critical KPIs—Cost Per Acquisition, Booking Rate, Close Rate, and Average Ticket—will help guide your business to growth and profitability.
Understanding these metrics provides a clear picture of where your business stands and what steps you need to take to improve. Whether it’s refining your marketing efforts, enhancing customer engagement, optimizing your sales process, or adjusting pricing strategies, each KPI offers valuable insights.
But remember, the power of KPIs lies not just in their tracking but in the action they inspire. By regularly reviewing these indicators and implementing targeted improvements, you can ensure your business not only survives but thrives in the dynamic business environment.
Embrace these KPIs as tools for strategic decision-making. Let them clear the path to achieving your business goals, and watch as your small business grows, evolves, and establishes itself as a leader in its niche. After all, in the world of small business, knowledge is power, and action is the key to success.
Propel Your Business Forward with Brightbeam: Boise SEO, Marketing, and Web Design
At Brightbeam, we understand that navigating the world of KPIs and data-driven growth strategies can be overwhelming for small business owners. That’s where we step in. Our team is dedicated to simplifying the process, making it easier for you to leverage these powerful tools to move your business forward.
With a focus on personalized strategies that align with your unique business goals, Brightbeam specializes in turning insights into actions for our clients. Whether you’re looking to lower your Cost Per Acquisition, improve your Booking and Close Rates, or increase your Average Ticket size, we have the expertise and experience to guide you every step of the way.
Don’t let the potential of your business go untapped. Partner with Brightbeam and unlock the growth and profitability you deserve. Contact us today to start your journey toward data-driven success. Together, we can turn your business aspirations into achievements.
Ready to elevate your business with Brightbeam? Reach out now and let’s craft a success story together.
