| KPI | Formula to Measure | When to Use | Advantages | Drawbacks |
|---|---|---|---|---|
| Revenue Growth Rate | ((Current Revenue – Previous Revenue) / Previous Revenue) * 100% | Assess overall business performance and growth | Tracks revenue trends over time | Ignores profit margins |
| Gross Profit Margin | ((Total Revenue – Cost of Goods Sold) / Total Revenue) * 100% | Evaluate profitability and cost efficiency | Identifies profitability of core operations | Ignores operating expenses |
| Net Profit Margin | (Net Profit / Total Revenue) * 100% | Measure profitability after all expenses | Evaluates overall financial health | Ignores non-operating income/expenses |
| Earnings Before Interest & Taxes (EBIT) | (Revenue – Operating Expenses) | Assess operational profitability and efficiency | Focuses on core operations profitability | Ignores interest and taxes |
| Return on Assets (ROA) | (Net Profit / Total Assets) * 100% | Measure the efficiency of asset utilization | Evaluates how well assets generate profit | Ignores liabilities and equity |
| Return on Equity (ROE) | (Net Profit / Shareholder’s Equity) * 100% | Assess the profitability relative to shareholder equity | Measures returns to shareholders’ investments | Ignores business size and debt |
| Earnings Before Interest & Taxes (EBIT) Margin | (EBIT / Total Revenue) * 100% | Evaluate operational efficiency and profitability | Focuses on core operations profitability | Ignores interest and taxes |
| Customer Acquisition Cost (CAC) | (Total Marketing and Sales Expenses / Total New Customers Acquired) | Calculate the cost to acquire a new customer | Evaluates marketing efficiency | Ignores customer retention and CLV |
| Customer Lifetime Value (CLV) | (Average Revenue per Customer * Average Customer Lifespan) | Measure the long-term value of a customer | Identifies high-value customers | Complex calculation and assumptions |
| Monthly Recurring Revenue (MRR) | Sum of Monthly Subscription Revenue | Track revenue generated from subscription-based services | Measures recurring revenue streams | Ignores one-time sales and other income |
| Customer Churn Rate | (Customers Lost in a Period / Total Customers at the Start of the Period) * 100% | Evaluate the rate at which customers are leaving | Identifies customer retention issues | Ignores new customer acquisition |
| Customer Retention Rate | ((Customers at the End of the Period – Customers Acquired During the Period) / Customers at the Start of the Period) * 100% | Measure the rate at which customers are staying | Evaluates customer loyalty and satisfaction | Ignores customer acquisition |
| Inventory Turnover Rate | (Cost of Goods Sold / Average Inventory Value) | Assess inventory management efficiency | Measures how often inventory is sold and replaced | Ignores seasonality and stockouts |
| Accounts Receivable Turnover Rate | (Net Credit Sales / Average Accounts Receivable) | Evaluate the efficiency of collecting accounts receivable | Measures how quickly outstanding payments are collected | Ignores credit terms and bad debts |
| Current Ratio | (Current Assets / Current Liabilities) | Assess short-term liquidity and ability to cover obligations | Measures liquidity and financial stability | Ignores long-term obligations |
| Quick Ratio (Acid-Test Ratio) | ((Current Assets – Inventory) / Current Liabilities) | Evaluate short-term liquidity excluding inventory | Focuses on liquid assets to cover short-term liabilities | Ignores inventory value |
| Debt-to-Equity Ratio | (Total Debt / Shareholder’s Equity) | Assess the proportion of debt relative to equity | Measures financial leverage and risk | Ignores profitability and operational efficiency |
| Operating Cash Flow Margin | (Operating Cash Flow / Total Revenue) * 100% | Evaluate cash generation from core operations | Focuses on cash flow from operating activities | Ignores investing and financing activities |
| Working Capital Ratio | (Current Assets – Current Liabilities) | Assess the ability to cover short-term obligations | Measures short-term liquidity | Ignores long-term obligations and cash flow |
| Return on Investment (ROI) | ((Net Profit from Investment – Cost of Investment) / Cost of Investment) * 100% | Measure the return on a specific investment or project | Evaluates investment profitability and efficiency | Ignores time value of money and risk |
| Employee Turnover Rate | (Number of Employees Who Left / Average Number of Employees) * 100% | Evaluate the rate at which employees are leaving | Identifies employee retention and satisfaction issues | Ignores hiring and recruitment efforts |
| Revenue per Employee | (Total Revenue / Total Number of Employees) | Measure revenue generated per employee | Evaluates employee productivity and revenue contribution | Ignores employee roles and responsibilities |
| Employee Satisfaction Score | (Sum of Employee Satisfaction Ratings / Total Number of Employees) | Assess overall employee satisfaction and engagement | Identifies areas for improvement in the workplace | Subjective and may lack specificity |
| Employee Productivity | (Total Output or Sales / Total Labor Hours) | Evaluate the efficiency and effectiveness of employees | Measures output relative to time spent working | Ignores individual and job-specific factors |
| Average Revenue per User (ARPU) | (Total Revenue / Total Number of Users) | Measure the average revenue generated per user | Identifies revenue potential and user value | Ignores user behavior and acquisition costs |
| Customer Satisfaction Score | (Sum of Customer Satisfaction Ratings / Total Number of Customers) | Assess overall customer satisfaction and loyalty | Identifies areas for improvement in products or services | Subjective and may lack specificity |
| Net Promoter Score (NPS) | (Percentage of Promoters – Percentage of Detractors) | Measure customer loyalty and likelihood to recommend | Identifies brand promoters and detractors | Ignores specific feedback and issues |
| Lead Conversion Rate | (Total Leads Converted into Customers / Total Leads Generated) * 100% | Evaluate the effectiveness of lead generation and conversion | Measures lead quality and sales efficiency | Ignores other stages of the sales funnel |
| Customer Support Response Time | (Total Time to Respond to Customer Inquiries / Total Number of Inquiries) | Monitor the speed of responding to customer inquiries | Improves customer support efficiency and satisfaction | Ignores response quality and complexity |
| Website Traffic Growth Rate | ((Current Website Traffic – Previous Website Traffic) / Previous Website Traffic) * 100% | Assess the growth of website visitors over time | Measures website popularity and online presence | Ignores user engagement and conversion |
| Cost per Lead (CPL) | (Total Marketing Costs / Total Leads Generated) | Calculate the cost of generating a new lead | Evaluates marketing efficiency and lead generation costs | Ignores lead quality and conversion |
| Employee Training ROI | ((Training-Related Benefits – Training Costs) / Training Costs) * 100% | Measure the return on investment in employee training | Identifies the impact of training on performance | Complex calculation and attribution |
| Supplier Performance Score | (Sum of Supplier Performance Ratings / Total Number of Suppliers) | Assess the overall performance of suppliers | Identifies areas for improvement in the supply chain | Subjective and may lack specificity |
| Inventory Holding Cost | (Average Inventory Value * Inventory Holding Cost Percentage) | Calculate the cost of holding inventory | Evaluates inventory management efficiency and costs | Ignores inventory turnover and demand |
| Social Media Engagement | (Total Likes, Comments, Shares, and Clicks on Social Media / Total Social Media Followers) * 100% | Evaluate the level of user engagement with social media content | Measures social media effectiveness and reach | Ignores follower quality and conversion |
| Lead-to-Customer Conversion Rate | (Total Customers Acquired / Total Leads Generated) * 100% | Evaluate the effectiveness of converting leads into customers | Measures lead quality and sales efficiency | Ignores lead nurturing and sales efforts |
| Customer Acquisition Rate | (Total New Customers Acquired / Total Number of Existing Customers) * 100% | Monitor the rate of acquiring new customers | Evaluates growth strategies and market expansion | Ignores customer retention and CLV |
| Market Share | (Company Sales / Total Market Sales) * 100% | Assess the company’s share of the total market | Measures competitive positioning and market dominance | Ignores market growth and customer preferences |
| Employee Diversity Ratio | (Number of Diverse Employees / Total Number of Employees) * 100% | Evaluate the diversity and inclusivity of the workforce | Identifies progress in promoting diversity and inclusion | Ignores other aspects of workplace culture |
| Employee Absenteeism Rate | (Total Employee Absentee Hours / Total Potential Work Hours) * 100% | Monitor the rate of employee absenteeism | Identifies workforce attendance and productivity issues | Ignores the reasons for absenteeism |
| Environmental Sustainability Score | (Sum of Sustainability Ratings / Total Number of Sustainability Assessments) | Assess the company’s commitment to environmental sustainability | Identifies areas for eco-friendly practices | Subjective and may lack specificity |
Connected Agile & Lean Frameworks
Read Also: Continuous Innovation, Agile Methodology, Lean Startup, Business Model Innovation, Project Management.
Read Next: Agile Methodology, Lean Methodology, Agile Project Management, Scrum, Kanban, Six Sigma.
Main Guides:
- Business Models
- Business Strategy
- Business Development
- Distribution Channels
- Marketing Strategy
- Platform Business Models
- Network Effects
Main Case Studies:
