Mercer Island
Chamber of Commerce

If the thought of “tracking KPIs” makes your eyes glaze over, you’re not alone. For many small business owners, Key Performance Indicators (KPIs) sound like something reserved for corporations with big budgets, bigger teams, and even bigger Excel spreadsheets. Who wants the hassle? But here’s the truth: 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 good news? You don’t need 47 dashboards or a data analyst to track the KPIs that matter. You just need to choose a few that tell you whether you’re growing, stalling, or unknowingly throwing money out the window. Consider this article a crash course on basic KPIs. KPIs You Should Be Tracking If you’re like most businesses that are just beginning their financial tracking and analysis you’re concentrating on two things—what did I make and how much did I spend? That’s a great start but it’s a lot more nuanced than that. If you’re ready to play in the big leagues but aren’t ready to hire your own analyst, here are 5 simple KPIs you should track (and you don’t need a business degree to do so): 1. Customer Acquisition Cost (CAC) What it is: How much it costs you to get a new customer. Why it matters: If you’re spending $100 to get a $50 sale, that’s not marketing—it’s expensive gambling. How to track it: Divide your total marketing + sales costs by the number of new customers gained in that period. Example: $1,000 spent / 10 new customers = $100 CAC Pro tip: Keep an eye on every month. If it’s creeping up, your ads, outreach, or messaging may need a tweak. 2. Customer Lifetime Value (CLV) What it is: The total revenue a single customer brings to your business over the course of your relationship with them. Why it matters: It’s not the first sale that makes you profitable—it’s the second, third, and fifteenth. How to track it: Average purchase value x number of purchases x average customer lifespan. When CLV > CAC = happy business owner. 3. Lead-to-Customer Conversion Rate What it is: The percentage of leads that turn into actual customers. Why it matters: Getting leads is great. Very exciting when someone shows interest in you but converting them is where the money happens. How to track it: (Number of new customers ÷ number of leads) x 100 Example: 10 customers ÷ 100 leads = 10% conversion rate Pro tip: If this number is low, your follow-up process or sales messaging might need work. 4. Revenue per Employee (or per Hour) What it is: A productivity metric that shows how efficient you or your team really are. It’s not about being busy, it’s about what you’re/they’re adding to the bottom line. Why it matters: Working hard is great but seeing results from that work is critical to your business’ success. For instance, imagine one employee having a laundry list of work accomplished over 40 hours but no sales to show for it or an employee working three hours and making the week’s sales number. Which employee is more valuable? How to track it: Total revenue ÷ number of employees (or hours worked, if you’re a solo act). This outcome calculates it in a general sense. If you want to figure out which employee is bringing in more revenue, you will have to create a system to assign sales to individual employees. Some PoS systems allow for codes, for instance, while most CRMs allow you to assign clients to salespeople. This calculation helps you see if you’re scaling well or just staying busy. 5. Churn Rate (a.k.a. Goodbye Rate) What it is: The percentage of customers who stop buying from you over a given period. Why it matters: A leaky bucket never fills, no matter how much water you pour in. How to track it: (Customers lost ÷ total customers at the start of the period) x 100 If this number is high, focus on customer experience, retention, and loyalty programs. Tracking Tips You don’t need to check these KPIs every day. Just set aside one hour a month to review them. Use a simple spreadsheet or dashboard, and ask: What’s improving? What’s declining? What actions should I take based on this? 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. KPIs aren’t just vanity metrics—they’re your early warning system, your gut check, and your business GPS. Track them consistently, and you’ll be more attuned to your businesses and where it’s headed.

When you want to get to know someone better and have a great conversation, what do you do? You ask them questions, of course. Questions get the conversation started and they show you have an interest in the person you’re speaking with. The same is true of your business. Asking and answering questions about the operation of your business can increase your efficiency and knowledge. By taking the time to perform a self-audit, you will get to know your business and process better and that means greater alignment with the needs of your target audience. Get to Know Your Business with These Questions When you first start your business, you probably stitched it all together on the fly in the least expensive way you could. After all, most of us aren’t backed by angel investors from the start. We cut corners to get going, to make things happen. It’s fine in the beginning. Bootstrapping is nothing to be ashamed of. But it can leave you at a long-term disadvantage. That’s why at some point in the growth of your company, you need to ask yourself: What Am I Proud of? Questioning what you’re most proud of in your business can help you get to the root of your business story. Your story can help you connect with your target audience and increase your revenue. Take some time to think about how and why you help and what makes you beam with pride. Then incorporate that into your marketing. What Do I Feel Ashamed Of? Conversely, it’s important to know where you think your weaknesses are. If you’re ashamed of something that means you don’t feel like you’re doing your best and putting forth your best effort. Why is that? Is it because you’re not the best person suited for that activity or responsibility? Now that you’ve built your business, could someone else be doing that? What Feels Clunky or Delayed? When you talk to other businesses, watch videos on the subject, or hear others describe their operations, is there something that feels behind the times in your business? Could something run smoother or be more efficient? Don’t ask yourself how you would do it, just note the specific things that could make a difference. Look for the friction in your operations, administration, and/or sales process. What’s Still Manual That Shouldn’t Be? Tech has come a long way in the past five years. If you’re still using the same tools you did in 2020, it may be time for a revamp. Conversely, if there’s something you’re doing manually that takes a lot of time and coordination, find out if it can be streamlined with new technology. Chances are it can. What Do You Hate Doing? Is there something you hate doing in your business? Why is that? Again, is it competency, time, or resources? Maybe you hate invoicing, for instance, because you don’t see yourself as detail oriented and that’s a role where it’s required. You’re probably right. Get someone else to do it. Maybe you hate doing the books, but you have to be the one to do it. Look into ways that would make it more enjoyable for you such as using dictation. What Bad Reviews Are You Getting? Is there something in your operation that everyone hates? Are most of your imperfect reviews about the same thing? If so, it sounds like there’s a sticking point in your process. How can you remedy it so that you and your customers will be happier? Like relationships, and items for that matter, it’s necessary to revisit the way things work periodically and ensure they’re functioning at their highest levels. Without occasional introspection and examination, your business could wither. Before you make sweeping change, asking yourself these simple questions can help you prioritize the change that is most needed and most likely to yield the best results.