The KPIs You Need To Measure For Your B2B Business
Key Performance Indicators (KPIs) are metrics that tell you how well your business is performing. They’re essential for tracking the progress of your company and identifying trends. KPI is a buzzword, but KPIs can be simple and straightforward to implement. In this article, we’ll explain what they are and why they matter to B2B businesses, then give examples of different types of KPIs to measure for B2B companies.
What are Key Performance Indicators (KPIs)?
Key performance indicators (KPIs) are a set of metrics that help you measure the performance of your business. They help you make better business decisions and improve your processes, which in turn leads to increased revenue. KPIs can be either qualitative or quantitative. Qualitative KPIs are also known as “soft” metrics because they involve factors like customer satisfaction and employee engagement. Quantitative KPIs are more measurable and may be used to track things like sales figures or profits over time, for example.
Why do you need to measure KPIs?
As we mentioned earlier, the goal of KPIs is to help you understand your business better. This can be done by measuring the performance of key activities or events that occur during the life cycle of a customer relationship with your company.
For example, if a customer makes an online purchase on your website and then follows up with an email requesting assistance or support for their product within 72 hours, that’s two important events: one being their initial purchase and another being how fast they contacted you regarding a problem or issue. You need to measure these two events in order for them to make sense within context of each other so that you can understand what’s working well and what needs improvement from both sides (the buyer/seller).
Different types of KPIs to measure for B2B
The key performance indicators (KPIs) you use for your B2B business will depend on the type of business you have and its goals. Here are some examples:
Revenue. If your goal is to increase revenue, then you’ll want to measure things like customer productivity, and churn rate.
Churn rate is a measure of how many customers you lose over time. In other words, it’s how many customers you have at the end of a certain period compared to how many you had at the beginning of that period. If your churn rate is high, then it means that more people are leaving your company than joining it. You can measure churn rate by calculating the percentage of customers who left in a given time period by dividing their total number by the number of customers at the beginning of that period.
Customer productivity is another way to measure how well your sales team is doing. It measures how much revenue each customer generates over time. Customer productivity is expressed as “annual recurring revenue per customer,” or ARR/C—how much money they bring in during an entire year divided by how many customers they have.
Sales. If your goal is to increase sales volume or number of leads generated, then you’ll want to measure things like conversion ratio, average order value (AOV), and customer acquisition cost (CAC).
Gross profit percentage is the difference between revenue and cost of goods sold (COGS). It’s a useful metric because it tells you how much money you’re making per sale, which can help you determine whether your service pricing is competitive.
Average order value is the average amount of money spent on each transaction. For example, if you charge $10 for service A, and all of your customers avail, then your average order value would be $10. But if half of your customers avail of twice of service A, then half of them $5 each (and so on) and the other half $20 each (and so on), then your average value would be $9 for a total of 20 orders at $9 each.
Customer acquisition cost is the average amount it costs to acquire a new customer. You can compute this by dividing total marketing expenses by total number of new customers acquired within a given period.
Profit. If your goal is to increase profit margins while maintaining or improving profitability, then you’ll want metrics like gross margin percentage as well as operating margin percentages.
Gross margin percentage is the difference between a company’s revenue and its cost of goods sold. It is a key indicator of how efficiently a company can produce and sell its products, as well as how much profit it makes on each sale.
In B2B, gross margin percentage is also a key indicator of how well a company’s sales team is selling their products.
Operating margin percentage is the difference between revenue and operating expenses. This metric shows how much profit a company makes after paying all of its employees, rent, and other operating costs.
There are many more KPIs that you can measure as a B2B business, but these are some of the most common ones. When you start measuring your KPIs, it’s important to keep in mind what they mean for your business and how they affect it. If you don’t know what your KPIs are yet or how they will benefit your company, take some time now to research them so that when the time comes later down the road, you’ll have a much easier time keeping tabs of these in the long run!