KPIs for small businesses

The principle

Pick a small set of KPIs (5-7 maximum) and track them every month. Trying to track everything ends with tracking nothing. The right KPIs depend on your business model.

Financial KPIs every business should track

• Gross margin % — gross profit as a percentage of revenue. Tells you whether your pricing covers direct costs.
• Operating margin % — operating profit as a percentage of revenue. Tells you whether overheads are under control.
• Cash runway — how many months of expenses your current cash balance covers
• Days sales outstanding (DSO) — average days customers take to pay
• Revenue per customer — concentration risk indicator

Service business additions

• Utilisation % — billable hours as a percentage of available hours
• Effective hourly rate — revenue / total hours worked
• Pipeline value — value of opportunities that haven't yet closed

Product business additions

• Inventory turn — how many times you sell through inventory in a year
• Customer acquisition cost (CAC)
• Customer lifetime value (LTV)
• LTV / CAC ratio — should be above 3 for a healthy business

Make them visible

A KPI you don't see is a KPI you don't track. Put your monthly KPIs on a one-page dashboard, review them with your team, and act on what they show.