📚 Business Metrics & KPIs
Key Performance Indicators (KPIs) use percentages to measure business success. Understanding these metrics is essential for entrepreneurs, managers, and investors.
1. Profit Margin:
Profit Margin = ((Revenue - Cost) / Revenue) × 100
Example:
A company has $500,000 in revenue and $350,000 in costs.
1
Profit = $500,000 - $350,000 = $150,000
2
Profit Margin = ($150,000 / $500,000) × 100 = 30%
2. Conversion Rate:
Conversion Rate = (Conversions / Total Visitors) × 100
Example:
An e-commerce site has 50,000 visitors and 1,500 purchases.
1
Conversion Rate = (1,500 / 50,000) × 100
2
Conversion Rate = 3%
Industry average is 2-3%, so this is good!
3. Market Share:
Market Share = (Company Sales / Total Market Sales) × 100
Market share shows what percentage of an industry's sales your company captures. Higher market share often means stronger brand recognition and competitive advantage.
Other Important KPIs:
- Customer Retention Rate: (Customers at end - New customers) / Customers at start × 100
- Gross Margin: (Revenue - COGS) / Revenue × 100
- Operating Margin: Operating Income / Revenue × 100
- Churn Rate: Customers Lost / Total Customers × 100
🎯 Try It Yourself
Try It Yourself
A company has revenue of $500,000 and costs of $350,000. What's the profit margin?
Profit = $500,000 - $350,000 = $150,000. Then divide by revenue and multiply by 100
Try It Yourself
A website has 50,000 visitors and 1,500 purchases. What's the conversion rate?
Conversion Rate = (1,500 / 50,000) × 100
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