KPI's to Watch in Your Business
Running a business without tracking your numbers is a bit like driving with your eyes closed. You might be fine for a while but eventually, something goes wrong and you won’t see it coming.
The good news? You don’t need a wall of dashboards to stay on top of things. You just need the right numbers for your type of business.
Here a few key KPI’s to keep an eye on (this is not an exhaustive list)
Service-Based Businesses
(Think: consultants, trades, accountants, healthcare, marketing agencies, cleaning services)
If your business sells time and expertise, these are the numbers that actually tell you how you’re tracking.
1. Utilisation Rate What percentage of your available hours are actually billable? If your team works 40 hours a week but only 25 are billable, that’s a 62.5% utilisation rate and the gap is either admin, unbilled work, or downtime. Know your number. Then decide if it’s acceptable.
2. Revenue Per Employee (or Per Hour) Headcount grows faster than revenue for a lot of service businesses. Track how much revenue each person in your team generates. If it’s shrinking over time, you’ve either got a pricing problem or a productivity problem.
3. Debtor Days (Accounts Receivable Days) How long does it take for clients to actually pay you? 30 days is fine. 75 days means you’re funding your clients’ cash flow. Chase your invoices. Set payment terms. Know this number.
4. Client Retention Rate How many of your clients come back year after year? In service businesses, repeat clients are gold. Losing them quietly is one of the most expensive things that can happen, you just don’t always notice straight away.
5. Work in Progress (WIP) Value How much unbilled work is sitting in the pipeline right now? This is a common blind spot for trades and professional services. WIP that isn’t invoiced isn’t income and it can seriously distort your cash flow picture if you’re not watching it.
6. Quote/Proposal Conversion Rate What percentage of your quotes or proposals actually turn into work? If it’s low, you either have a pricing problem or a targeting problem. Either way, it’s worth knowing.
7. Net Profit Margin Revenue is vanity. Profit is sanity. After all your costs — wages, rent, subscriptions, everything — what’s actually left? Know your margin and know if it’s improving or eroding.
Product-Based Businesses
(Think: retail, ecommerce, wholesale, manufacturing, food and beverage)
If you sell physical things, your numbers are a bit different — because inventory, cost of goods, and stock movement all come into play.
1. Gross Profit Margin (and Landed Cost Per Unit) Your gross margin is your sales revenue minus the cost of the actual goods you sold (your COGS). If you’re selling a product for $100 and it costs you $70 to make or buy, your gross margin is 30%. Too thin and you can’t cover overheads. But here’s the catch — your COGS needs to reflect your true cost per unit: purchase price + freight + customs + handling. A lot of product businesses only track the invoice price and wonder why margins are worse than expected. Know your landed cost first, then work out your real margin.
2. Inventory Turnover How quickly are you selling through your stock? Slow-moving inventory ties up cash and creates risk (especially if product has a shelf life or goes out of season). High turnover generally means your buying is working well.
3. Average Order Value (AOV) What does the average customer spend per transaction? Small increases here — through bundling, upselling, or minimum order thresholds can have a big impact on revenue without needing more customers.
4. Customer Acquisition Cost (CAC) How much does it cost you to get a new customer — ads, time, commissions, all of it? If your CAC is higher than what a customer spends with you, you have a problem. If you don’t know your CAC, start finding out.
5. Return Rate What percentage of products are being sent back? High returns can quietly destroy your margin, especially in ecommerce. If you’re not tracking it, you might be selling more than you think and keeping less than you expect.
6. Repeat Purchase Rate What percentage of your customers buy from you more than once? Particularly relevant for ecommerce.
7. Stock on Hand vs. Cash Position A product business can look profitable on paper while being completely cash-strapped because all the money is sitting in stock on a shelf. Watch this relationship closely, especially heading into slower periods.
8. Net Profit Margin Revenue is vanity. Profit is sanity. After all your costs — cost of goods, wages, rent, subscriptions, everything — what’s actually left? Know your margin and know if it’s improving or eroding.
This isn’t an exhaustive list — there are plenty of other metrics worth tracking depending on your industry and stage of business. But these are a solid starting point, and getting on top of even a handful of them will give you a much clearer picture of where your business actually stands.
One Last Thing
These numbers only help you if you’re actually looking at them regularly — not once a year when your accountant asks for your records. Monthly is ideal. Quarterly at minimum.
If you’re not sure where to start, or your reporting isn’t set up in a way that makes this easy, that’s exactly the kind of thing we help with at Katalyst Accounting.
Feel free to reach out — we’re always happy to have a conversation.
Disclaimer
This article is general in nature and provides only a basic overview of potential tax planning strategies. It does not take into account your personal circumstances. More comprehensive and tailored strategies may be available to you, so we strongly recommend seeking professional advice before taking action.