KPI (Key Performance Indicator) tracking is the practice of a company or organization periodically evaluating important metrics to their business. In a data-driven world, KPI tracking is becoming even more important as important stakeholders (investors, founders, employees, customers, and more) demand answers to important company metrics such as monthly recurring revenue, support response times, and more. This piece dives into how companies today manage KPI tracking and how you can implement KPI tracking with best-in-class tools.
For customer success, a great metric for measuring, well, success is Net Dollar Retention. NDR is defined as:
(Starting ARR - Churn - Contraction + Expansion) / (Starting ARR)
Essentially, it asks the question: are our users growing with us, or leaving us, as measured in dollars. For a team to be properly motivated on the customer success side to push for product adoption, product expansion, and reduce churn, it’s a good idea to hold team members accountable to a certain metric such as Net Dollar Retention. While NDR best-in-class definitions do vary, it is usually best to keep this number above 100% and, ideally, north of 110%.
Looking to calculate your own NDR and compare it against industry benchmarks? Check out our free NDR calculator below!
Churn is a great way to measure whether customers are overall getting value from a product, as it helps to find the rate of people leaving the product. Churn rate is defined as:
(Lost Customers) / (Total Customers at Start) x 100
Product leaders can use this information to understand if major platform changes had a positive or negative impact on user experience. In general, keeping churn in the single digit percentages is considered a best-in-class outcome.
Looking to calculate your own company's churn rate and compare against industry benchmarks? Check our our free churn rate calculator below!
For sales, close rates is a great way to evaluate the performance of account executives and to keep the team motivated behind a consistent metric. Close rate is defined as:
(Close Won)/(Number of Opportunities) x 100
This is a good, objective metric for understanding team performance and evaluating if recent changes have positively affected the sales process.
For marketing, cost per lead is an important metric for understanding if a particular advertising channel or marketing campaign is having the desired effect of bringing in potential customers. Cost per Lead is defined as:
(Total Marketing Spend)/(Total Lead Count)
While not a perfect metric, it is a great starting point for roughly evaluating whether a particular area of investment is worthwhile for the team. Attribution can be difficult to ascertain in some cases, but nonetheless having an approximate metric is much more helpful than no metrics at all.
Monthly Recurring Revenue is thetotal active subscriptions to a company in a given month. This is typically the most important metric for a company, as it says, in dollar terms, the total paying subscribers to a service. While product enjoyment, engagement, and more is important, at the end of the day organizations prioritize with their dollar allocations; further, businesses must sustain themselves with a cash balance. MRR is the closest approximation for point-in-time business health.
Customer Acquisition Cost (CAC) is one of the most important metrics for a company, as it implies how much it costs to get a new customer. It is generally defined as:
((Total Cost of Sales) + (Total Cost of Marketing))/(New Customers Acquired)
This metric is extremely helpful when evaluating the efficiency of the sales and marketing organizations together. While it is hard to attribute any shortcomings to sales over marketing or vice versa, it is easier to evaluate whether there is an overarching problem by looking at CAC.
Customer lifetime value measures revenue over the cost to service that customer over their lifetime. It is defined as:
(Revenue)*(Relationship Duration) - (CaC + Servicing Cost)
In general, CLTV describes the overall value of your customers, which helps inform the entire marketing, sales, and product strategy, as higher value customers are worth spending more time with, whereas lower value customers may need a more self-service experience.
Net promoter score tracks how much your customers are enjoying your product by asking them to rate your product on a scale of 1-10 and averaging those results.
Net promoter score is a wonderful metric to track, as it gives an objective measure to sentiment, which can be extremely nebulous to otherwise ascertain.
KPIs create an obvious mechanism to judge team performance and enables teams to be held accountable to hitting a metric. By agreeing to a metric ahead of time, if a team underperforms, it can be a great time for intervention and correction. If a team over performs, it can be a great time to evaluate goal setting. Without an objective measure, it is difficult for teams to retrospect about the quality of their performance and adjust.
With a clear metric, teams can be motivated. For example, if a team is one deal shy of hitting the goal in a quarter, individuals will typically be more motivated than a nebulous goal of closing as many deals as possible. By having a goal, teams can work backwards to understand how they can pace towards that goal. If the goal is to close 36 deals in a quarter, then that implies a team must be closing around 3 deals a week to match the goal, which motivates all team members to work hard each week.
It’s never good when management and individual contributors disagree on performance. Metrics are an objective measure of performance which can help align everyone on the quality of a team’s performance. While metrics can have caveats to their validity and applicability, it is a great way to start a performance conversation.
By having objective metrics, teams can notice patterns that they otherwise may not. For example, if churn spiked in a particular month, a team can dive into changes in the underlying team or product that may have caused this undesired outcome. Maybe the team noticed a lot of new CSMs were being onboarded, which led to this experience, meaning that the team needs to take more time to ramp up new CSMs.
Teams should KPI track from day 1. The number of metrics and the depth by which information is recorded may improve over time, but at a minimum a team should be tracking metrics such as MRR. Additionally, early stage teams could be tracking cold outbound per day or other similar metrics to ensure they are hitting their goals.
Typically, founders will be the first individuals responsible for KPI tracking. From there, any leader on a team will eventually be responsible for KPI tracking, as it is important for any business unit to understand their goals, track their goals, and ensure they are hitting their goals.
With the rise of AI and Large Language Models (LLMs), AI has become a centerpoint of KPI tracking. Explo Report Builder AI is one of the premiere products in this space, enabling teams to chat with an AI to get insights into their underlying KPIs. Teams simply need to connect a data source and they can then begin to slice and dice data with the power of AI behind the experience. As AI continues to improve, so too will the abilities of AI agents to gain real-time, automated metric insights for teams.
Explo is the best tool in the market to get started with free KPI tracking. The dashboarding experience is intuitive and simple to get started with, as teams can drag and drop data to get quick insights, even scheduling reports for the team to gain insights at the cadence the team needs.
Google Sheets offers an excel-like workflow for setting up KPI tracking. Simply input your data by hand, then drag in powerful visualizations. While Google Sheets doesn’t offer a particular scalable way to KPI track, as it is difficult to alter data and automatically update data, it is a great starting point for teams that want a free, intuitive interface for simple chart making and tracking.
Stripe has one of the most iconic dashboarding experiences on the market. While Stripe itself is not free to use, the handy dashboarding for common metrics such as sales or refunds can be a great starting point for teams that want to track their revenue data. While Stripe doesn’t extend beyond those KPIs, it can be a great solution for early teams whose primary KPIs center around revenue.
Databox is a tool built specifically for internal KPI tracking. It offers the ability to connect disparate data sources and get a quick insight into that data. Databox offers a free tier as well, enabling you to try the service and grow within it.
GA is one of the best tools for tracking website and application performance data, with automated charts that give teams quick, useful insights. The biggest downside of google analytics is its inability to help with metrics outside of website monitoring, but it can be a great place to go to get insights on page visits, average session, and more.
If you want to setup your own metrics in less than 10 minutes, Explo is the best option to do that. We will use the Explo Report Builder to quickly create our KPI: sales by month for our e-commerce company.
First, we need to connect our datasource in a simple setup process.
Next, we need to add our dataset for us to be able to look at. In this case, we will select all our records from our E-commerce table.
Now, we will dive into the chart experience. We will click on our Orders dataset that we just created.
We then have access to all the orders for our business. These orders track the sale date, sale amount, and more for us to be able to aggregate to extract insights.
To create a beautiful chart, we need to take 3 simple steps:
Now, we have a great chart of our total sales by month in just a few simple steps!
If we want to get a recurring insight sent to the team, we can easily do that by scheduling a report in the Report Builder, enabling the team to be sent insights via CSV, PDF, or other exports on a scheduled recurring basis.
Now our team has a recurring KPI sent to us, which we are able to setup in as little as 10 minutes. As you can see, Explo Report Builder offers a simple interface for getting started with tracking an important metric for our business.
KPI tracking has become the default for most SaaS businesses of any size, from the early stage startup through post-IPO. With the rise of big data and AI, KPI tracking will become even more commonplace in organizations. While KPI tracking is important, it is equally important for organizations to focus on the most important, predictive KPIs and not get carried away with tracking unimportant metrics. Hopefully this piece shed some light on how KPI tracking works, who can benefit from KPI tracking, and how you can intelligently incorporate KPIs into your corporate workflows.