{"id":69123,"date":"2021-06-30T14:58:10","date_gmt":"2021-06-30T12:58:10","guid":{"rendered":"https:\/\/www.sage.com\/en-za\/blog\/?p=69123"},"modified":"2026-01-29T15:32:50","modified_gmt":"2026-01-29T13:32:50","slug":"5-kpis-that-every-small-business-should-measure","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-za\/blog\/5-kpis-that-every-small-business-should-measure\/","title":{"rendered":"5 KPIs that every small business should measure"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-za\/blog\/category\/money-matters\/\" class=\"entry-header__link\">Money Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\t5 KPIs that every small business should measure\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2021-06-30T14:58:10+02:00\">Jun 30, 2021<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"5 KPIs that every small business should measure\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-za\/blog\/5-kpis-that-every-small-business-should-measure\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-za\/blog\/author\/mongezilupindo\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2021\/12\/Mongezi-350x350.jpg\" class=\"entry-author__image\" alt=\"\" \/>\t\t\t\t<span class=\"entry-author__name\">Mongezi Lupindo<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<p>What started out as a passion or hobby is now a thriving business. But is thriving the same as growing?<\/p>\n\n\n\n<p>Depending on an organisation\u2019s objectives, measuring growth will differ from one company to the next. The amount of repeat customers a company can produce from its products can be used to gauge how effective its growth strategy is and how many loyal customers it is acquiring.<\/p>\n\n\n\n<p>While each company has its own set of <a href=\"https:\/\/www.sage.com\/en-za\/blog\/the-problem-with-traditional-business-metrics-part-1\/\">key performance indicators<\/a> (KPIs), there are some common KPIs that every small business should be aware of.&nbsp;In this article, we\u2019ll look at:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Sales revenue<\/li>\n\n\n\n<li>Net profit and net profit margin<\/li>\n\n\n\n<li>Gross profit and gross margin<\/li>\n\n\n\n<li>Monthly recurring revenue<\/li>\n\n\n\n<li>Customer acquisition cost<\/li>\n\n\n\n<li>Additional resources to help you understand small business finance<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><br><h3><strong> Sales revenue<\/strong><\/h3><br><\/li>\n<\/ol>\n\n\n\n<p>Most firms use revenue as the initial KPI to determine success and market demand. The income generated from all client purchases is referred to as sales revenue. Returns or undelivered services are subtracted from this income to get the final sales revenue result.<\/p>\n\n\n\n<p>Other important <a href=\"https:\/\/www.sage.com\/en-za\/blog\/glossary\/what-is-revenue\/\">revenue<\/a> KPIs are revenue per employee and revenue growth rates.<\/p>\n\n\n\n<p>Revenue per employee allows you to quantify the productivity and value of an employee. This can help you determine whether to grow or reduce the size of your team.<\/p>\n\n\n\n<p>Measuring revenue growth rates requires breaking down measured performance by a time period, say a month, quarter, or year. For example, comparing sales revenue from March 2019 to March 2020 can show you market fluctuations, changes in customer demand, and may also provide insight into the reasons behind growth fluctuations. <div class=\"single-cta\">\n\t<a\n\t\tclass=\"button button--primary gate-80195606-5387-4569-bfaf-b6a518449b24\"\n\t\trole=\"button\"\n\t\tdata-button-location=\"content_area\"\n\t\thref=\"#gate-80195606-5387-4569-bfaf-b6a518449b24\"\n\t>Download your small business survival toolkit<\/a>\n<\/div>\n<\/p>\n\n\n\n<ol start=\"2\" class=\"wp-block-list\">\n<li><br><h3><strong> Net profit and net profit margin<\/strong><\/h3><br><\/li>\n<\/ol>\n\n\n\n<p>Unfortunately, your net profit \u2013 or take-home pay \u2013 is not equal to your sales income. After all expenses, like cost of goods sold, operational expenses, and debt, have been accounted for, net profit, also known as the bottom line or net income, is the amount left over.<\/p>\n\n\n\n<p><em>Net profit = Revenue minus The cost of goods sold minus Operating and other expenses minus Interest minus Taxes<\/em><\/p>\n\n\n\n<p>You should be aware of your numbers. Many small firms believe they are too small to succeed. It&#8217;s critical to recognise your market potential&nbsp;and develop your business model to ensure that your price and business model are feasible.<\/p>\n\n\n\n<p>While knowing your net profit is important, your net <a href=\"https:\/\/www.sage.com\/en-za\/blog\/glossary\/what-is-a-profit-margin\/\">profit margin<\/a> is a stronger indicator of the financial health of your business. The percentage of net profit created by your company\u2019s revenue is your net profit margin.<\/p>\n\n\n\n<p><em>Net profit margin = Net profit divided by Revenue<\/em><\/p>\n\n\n\n<p>If you notice that your margins are small or haven&#8217;t&nbsp;improved over time, you may need to boost your prices or rethink how you promote your product or service to grow appropriately.<\/p>\n\n\n\n<ol start=\"3\" class=\"wp-block-list\">\n<li><br><h3><strong> Gross profit and gross margin<\/strong><\/h3><br><\/li>\n<\/ol>\n\n\n\n<p><a href=\"https:\/\/www.sage.com\/en-za\/blog\/glossary\/what-is-gross-profit\/\">Gross profit<\/a> is closely related to net profit. The variable expenses associated with generating revenue are only taken into account when calculating gross profit.<\/p>\n\n\n\n<p><em>Gross profit = Revenue minus Cost of Goods Sold<\/em><\/p>\n\n\n\n<p>Gross profit margin (GPM) is a metric that indicates how well a product or a group of items performs in your business. You can fix any potential weakness in your business before it becomes an issue by keeping an eye on your gross profit margin.<\/p>\n\n\n\n<p><em>Gross margin = Gross profit divided by Revenue<\/em><\/p>\n\n\n\n<ol start=\"4\" class=\"wp-block-list\">\n<li><br><h3><strong> Monthly recurring revenue<\/strong><\/h3><br><\/li>\n<\/ol>\n\n\n\n<p>Monthly recurring revenue (MRR) is one of the most important business indicators, especially if you run a subscription-based firm. Instead of focusing on one-time sales, <a href=\"https:\/\/www.sage.com\/en-za\/blog\/how-saas-delivers-cost-savings\/\">you&#8217;re focusing on customer retention and reducing churn<\/a>.<\/p>\n\n\n\n<p>One of the most effective business growth tactics is to test your product or service with a small target market to confirm product-market fit before scaling it to profitability. This will&nbsp;give you insight into some&nbsp;of the most important indicators, including&nbsp;customer acquisition cost and lifetime value.<\/p>\n\n\n\n<p>While MRR might seem straightforward, there are several variables to consider. You\u2019ll want to measure new MRR (i.e., new customers), expansion MRR (customers who upgraded their plan), and churn MRR (revenue lost from customers who cancelled their subscriptions).<\/p>\n\n\n\n<p>Because it is a statistic used for planning, MRR performs a similar function as a gross profit margin. This is a critical KPI to track if you report to a board of investors.<\/p>\n\n\n\n<p>Once you\u2019ve tested your product or service on a smaller market size and have closely tracked all of your key metrics, you\u2019ll be able to put together a strong case for potential investors. Because they\u2019ll will want to know exactly where their money is going, and what it will be used for, having a good amount of data that proves that your product or service works \u2013 no matter how small the market size \u2013 is crucial.<\/p>\n\n\n\n<ol start=\"5\" class=\"wp-block-list\">\n<li><br><h3><strong> Customer acquisition cost<\/strong><\/h3><br><\/li>\n<\/ol>\n\n\n\n<p>Without customers, you don\u2019t have a business. Focus on customer acquisition because this is where most companies have a leak in their funnel. Learn as much as you can about potential customers and then reach out using any methods available \u2013 whether that be through email, cold calling, or social media \u2013 and show them how your product or service can work for them and why they need it.<\/p>\n\n\n\n<p>Many companies, on the other hand, are so focused on the \u201cwin\u201d of closing a sale that they forget how much money was spent to acquire the customer in the first place. Customer acquisition cost (CAC) is calculated by dividing all costs spent on acquiring a new customer by the number of customers acquired in a specific timeframe. Keeping a low CAC is critical to scaling your business.<\/p>\n\n\n\n<p><em>CAC = Total customer acquisition expenses divided by the number of customers acquired<\/em><\/p>\n\n\n\n<p>CAC is frequently used in conjunction with lifetime value (LTV), which is the entire revenue a company can expect from a single customer. LTV is a strategic KPI used to assess which customer segments are the most profitable to a business.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-conclusion\"><strong>Conclusion<\/strong><\/h3>\n\n\n\n<p>By constantly evaluating the KPIs that are tied to your business\u2019s goals, you can ensure that your company is always growing. You\u2019ll also be able to identify issues and correct them before they have a negative impact.<\/p>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">7 tip to supercharge your business decisions<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Discover the seven powerful insights that can help keep your business healthy, wealthy and wise.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-b05973c1-bed3-436e-998d-2a33acc6c95f\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download your free guide<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1064\" height=\"810\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2019\/11\/Black-Friday-1675x1275-1064x810.jpg\" class=\"single-cta__image\" alt=\"Shop owner holding tablet\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2019\/11\/Black-Friday-1675x1275-1064x810.jpg 1064w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to the Sage Advice enewsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get a roundup of our best business advice in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-84fe79b5-668d-41f8-a0cc-6229018c4ac9\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2022\/04\/GettyImages-1181404518-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2022\/04\/GettyImages-1181404518-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>What started out as a passion or hobby is now a thriving business. But is thriving the same as growing? Depending on an organisation\u2019s objectives, measuring growth will differ from one company to the next. The amount of repeat customers a company can produce from its products can be used to gauge how effective its [&hellip;]<\/p>\n","protected":false},"author":904,"featured_media":68327,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[25],"tags":[294,186,188,189],"business_type":[2],"lilypad":[],"context":[],"industry":[],"persona":[16],"imagine_tag":[73,85,86],"coauthors":[430],"class_list":["post-69123","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","tag-accountants","tag-entrepreneurship","tag-expenses","tag-financial-insights","business_type-small-business"],"sage_meta":{"region":"en-za","author_name":"Mongezi Lupindo","featured_image":"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2019\/07\/resize-1675x1275-43.jpg","imagine_tags":{"73":"Money Matters","85":"Small business","86":"Start up business"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice South Africa","distributor_original_site_url":"https:\/\/www.sage.com\/en-za\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts\/69123","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/users\/904"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/comments?post=69123"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts\/69123\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/media\/68327"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/media?parent=69123"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/categories?post=69123"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/tags?post=69123"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/business_type?post=69123"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/lilypad?post=69123"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/context?post=69123"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/industry?post=69123"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/persona?post=69123"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/imagine_tag?post=69123"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/coauthors?post=69123"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}