Most Important Small Business KPIs to Track

Most Important Small Business KPIs to Track

KPI or Key Performance Indicator is a statistic, number or measurement reporting on specific business aspects. KPIs can be debt ratio, customer satisfaction ratings, sales volume etc, which indicate whether or not objectives are being met. These are used by any type of business, and the data is used to show the performance of a business. Find out about some of the most important small business KPIs that a small business owner should track.

Cash Flow Forecasts

These allow businesses to make assessment whether their margins and sales are appropriate. These happen to be among the most vital KPIs that small businesses need to track. Small business owners can forecast cash flow by adding the total cash in savings to the projected cash value for the following few weeks, and subtracting the cash projections for the same period. Smart business owners carry out cash flow forecasts regularly, to detect issues in the initial stages and make some adjustments, if needed. A cash flow forecast, other than assisting businesses in anticipating shortages or surpluses in the future, is important for future loan applications and tax planning.

Revenue Growth Rate

As can be expected, it is an indication of the rate of growth in sales or increase of income of a company. Entrepreneurs, in order to determine the revenue growth rate, have to start with the total revenue of a business for the present year. The current revenue has to be divided by the total revenue from the earlier year, to determine the growth rate. When the revenue growth rate is calculated regularly, it can be assessed whether there growth has reached a plateau or is increasing or decreasing. It can be used to make any changes needed in order to ensure the continuation of profit.

Inventory Turnover

It makes an assessment of how many times the inventory is used or sold within a specific time period. This is valuable as it shows the capacity of a business to shift goods. You can find Inventory turnover by adding the cost of inventory sales up, and then dividing the total with the value of the rest at the end of the year. Although businesses naturally aim at pursuing a high rate of turnover, they need to be wary of achieving such a goal by reducing the cost too much. When the inventory turnover ratio is calculated, you can measure and make plans for inventory adjustment as required. This is one of the best small business tips.

Relative Market Share

It is among the most vital KPIs, and displays the market share that is controlled in terms of percentage by a business. Once you find the market share of your business, subtract the value from 100 and determine the percentage of the market regulated by your business. Next, divide the market share by the market percentage that is not regulated. When you multiply the result with the numeral 100, you can get the relative market share for your company. Relative market share, as compared to internal metrics, shows the performance of a company in relation to its business competitors.