WC Wisconsin News

For small business owners, tracking key performance indicators (KPIs) can be an important step in understanding how their business is performing. While the concept of KPIs may seem suited for large corporations with extensive resources, experts suggest that monitoring a few simple metrics can provide valuable insights for businesses of any size.

"KPIs are just numbers that tell a story and if you’re not paying attention to them, you’re running your business with the lights off," the article states.

Five basic KPIs are recommended for small businesses:

1. Customer Acquisition Cost (CAC): This measures how much it costs to gain a new customer by dividing total marketing and sales expenses by the number of new customers in a given period. The article notes, "If you’re spending $100 to get a $50 sale, that’s not marketing—it’s expensive gambling."

2. Customer Lifetime Value (CLV): This tracks the total revenue generated from a single customer over time. "It’s not the first sale that makes you profitable—it’s the second, third, and fifteenth," according to the article.

3. Lead-to-Customer Conversion Rate: This metric shows what percentage of leads become paying customers. The article explains its importance: "Getting leads is great. Very exciting when someone shows interest in you but converting them is where the money happens."

4. Revenue per Employee (or per Hour): By dividing total revenue by either employee count or hours worked, this KPI helps measure productivity and efficiency.

5. Churn Rate: Sometimes called the "goodbye rate," churn measures how many customers stop buying over a set period. The article cautions, "A leaky bucket never fills, no matter how much water you pour in."

The guidance suggests that small business owners do not need advanced software or daily tracking; instead, setting aside an hour each month to review these numbers can help identify trends and inform decisions.

"If you’re not sure what the trends mean, try plugging them into the AI of your choosing and ask it to run a basic analysis of the numbers and offer suggestions," reads another tip from the article.

Consistent monitoring of these KPIs is described as essential for early warning signs and maintaining direction in business operations: "KPIs aren’t just vanity metrics—they’re your early warning system, your gut check, and your business GPS."