KPI and Metrics
Metrics and Key-Performance Indicators (KPIs) are essential tools used by businesses to measure performance, evaluate progress and guide decision making. Although they are often referred to as the same, there are a few key differences between KPIs and metrics. In this guide we will give you a deeper understanding of how to use metrics and KPIs for the benefit of your business.
KPI
A KPI is a specific metric that is directly tied to business objectives and used to measure success. KPIs are the most important metrics that indicate whether a company is achieving its strategic goals.
🔹 Example:
- Conversion Rate (if the goal is increasing sales)
- Customer Churn Rate (if the goal is customer retention)
- Net Promoter Score (NPS) (if the goal is customer satisfaction)
Metric and KPI - what is the difference?
Metrics and KPIs (Key Performance Indicators) are related but serve different purposes in performance measurement. Where business metrics are more general, KPIs are more specific.
KPI and metric - key differences
| Feature | Metrics | KPIs |
|---|---|---|
| Definition | Any measurable data point | A metric that directly tracks success |
| Focus | General performance tracking | Business-critical performance tracking |
| Tied to Goals? | No, just data collection | Yes, aligned with business objectives |
| Example | Website visits | Website conversion rate |
Think of metrics as all the data on your car’s dashboard (speed, fuel level, temperature). KPIs are the most critical indicators for your journey (fuel efficiency if your goal is cost-saving, speed if your goal is reaching a destination quickly).
Business metrics
Metrics help businesses monitor progress, identify trends, and diagnose problems before they become critical. They provide data-driven insights across various business functions.
Upsides of Using Metrics for Performance Tracking:- Real-Time Visibility: Understand how different departments or processes are performing.
- Early Problem Detection: Identify potential bottlenecks or inefficiencies before they escalate.
- Benchmarking & Goal Setting: Compare current performance against historical data or industry standards.
- Alignment & Accountability: Ensure employees and teams are aligned with company goals.
Business metrics aren’t just numbers—they drive strategic actions and ensure continuous improvement.
Metrics and decision making
Metrics empower businesses by allowing them to make well-informed decisions grounded in concrete, real-world data rather than relying on intuition or untested assumptions. By utilizing metrics, companies gain a comprehensive and transparent understanding of their operations, enabling leaders to clearly identify what components of their business are yielding positive results and which areas require improvement. This clarity allows business leaders to allocate resources more strategically, ensuring that time, money, and effort are directed towards initiatives that will drive growth and success.
Metrics provide data-driven insights that help leaders make informed, strategic decisions.
Ways Metrics Support Decision-Making
| How | Example |
| Identifying Strengths & Weaknesses | If CAC is increasing while conversion rates are dropping, marketing strategies may need revision. |
| Optimizing Resources | If sales reps struggle to hit quotas, adjust territories or reallocate budgets. |
| Forecasting & Strategic Planning | Revenue growth trends help set realistic goals for the next fiscal year. |
| Improving Operational Efficiency | If customer support response time is slow, invest in automation or hire more agents. |
| Enhancing Employee Performance | If a sales rep consistently underperforms, provide additional training or coaching. |
Growth metrics
Metrics provide a comprehensive framework to track and analyze business growth while measuring progress against long-term strategic goals. By offering precise and quantifiable insights, metrics allow organizations to monitor revenue expansion, customer satisfaction enhancement, and market share increases. These metrics serve as vital tools for tracking performance over time, enabling businesses to gain a clearer understanding of where they are excelling and pinpointing areas where they may be falling short.
Metrics and Performance Accountability
Metrics establish clear expectations and accountability across the organization by creating a structured framework where goals are clearly defined and communicated. This process involves setting measurable targets that provide a clear benchmark for success, allowing teams and individuals to understand precisely what is expected of them. With these well-defined objectives in place, it becomes possible to evaluate performance in an objective manner, free from personal bias or subjective interpretation.
Metrics examples
As metrics refer to any measurable data point, there is really no clear line to be drawn as to what is referred to as a metric in business. Below we have listed a few examples of common SaaS metrics used for general performance tracking: Annual Recurring Revenue, Monthly Recurring Revenue and Churn.
Annual Recurring Revenue
Annual Recurring Revenue (ARR) is the total predictable and recurring revenue a business generates from subscriptions or contracts in a year. It’s a key metric for SaaS (Software-as-a-Service) and subscription-based companies, as it represents stable, long-term revenue rather than one-time sales.
How to Calculate ARR
ARR is calculated as: ARR = Total Annual Subscription Revenue + Expansion Revenue − Churned Revenue
Example:
- A SaaS company has 100 customers, each paying $1,200 per year ($100/month).
- ARR = 100 × $1,200 = $120,000.
- If 5 customers upgrade their plans and pay an extra $500 per year, ARR increases by $2,500.
- If 3 customers cancel, each worth $1,200, ARR decreases by $3,600.
- Final ARR = ($120,000 + $2,500 - $3,600) = $118,900.
Why is ARR Important?
✅ Predictable Revenue → ARR helps businesses forecast future revenue and plan budgets.
✅ Growth Indicator → ARR growth shows how well a business retains and expands its customer base.
✅ Pricing & Expansion Strategy → Helps companies decide whether to focus on new sales, upgrades, or retention.
Monthly Recurring Revenue
Monthly Recurring Revenue (MRR) is the total predictable revenue a business generates from subscriptions on a monthly basis. It’s a key metric for SaaS and subscription-based businesses, helping them track financial health and growth trends.
How to Calculate MRR
MRR is calculated as: MRR = Total Number of Customers × Average Revenue Per Account (ARPA)
Example:
- A SaaS company has 200 customers, each paying $50 per month.
- MRR = 200 × $50 = $10,000.
- If 10 customers upgrade and pay an extra $20 per month, MRR increases by $200.
- If 5 customers cancel, each worth $50, MRR decreases by $250.
- Final MRR = ($10,000 + $200 - $250) = $9,950.
Why is MRR Important?
✅ Revenue Predictability → Helps businesses forecast future revenue and plan expenses.
✅ Growth Tracking → MRR growth indicates business health and scalability.
✅ Investor & Stakeholder Confidence → MRR is a key metric for SaaS valuations.
✅ Customer Retention Insight → Churned MRR reveals customer satisfaction issues.
Churn
Churn refers to the loss of customers or revenue over a given period. It’s a critical metric for subscription-based businesses (like SaaS) because high churn can signal customer dissatisfaction, weak product-market fit, or competitive pressure. Also, there are different types of churn to consider.
Revenue Churn
Revenue Churn measures lost revenue, and is what is part of the calculation of Annual Recurring Revenue. Revenue Churn Rate = (Churned MRR in a Period ÷ Total MRR at the Start of the Period) × 100
Example:
- A SaaS company starts the month with $100,000 MRR.
- $5,000 MRR is lost due to customer cancellations and downgrades.
- Revenue Churn Rate = (5,000 ÷ 100,000) × 100 = 5%
✅ Use Case: More meaningful than logo churn if different customers pay different amounts.
Why is Churn Important?
✅ Retention Focus → Reducing churn is more cost-effective than acquiring new customers.
✅ Revenue Stability → Lower churn means more predictable recurring revenue.
✅ Investor Confidence → High churn signals risk, while low churn shows strong customer loyalty.
If you are interested in learning more about the different types of churn and how they impact your SaaS business, we suggest you read our article on churn.
MRR vs. ARR (Annual Recurring Revenue)
MRR and ARR are basically to sides of the same coin. As ARR provides a snapshot of what a company will have in revenue over the next 12 months (if nothing changes), MRR provides a more granular view of how the business is developing short-term. To get the ARR you can simply multiply MRR by 12, as there is 12 months in a year.
| Metric | What It Measures | Best for... |
|---|---|---|
| MRR | Recurring revenue per month | Short-term performance tracking |
| ARR | Recurring revenue over a year | Long-term financial planning |
Example: If a SaaS company has an MRR of $10,000, then:
ARR = 10,000 × 12 = 120,000
Why are KPIs important?
Key Performance Indicators (KPIs) are the critical metrics that have the greatest impact on your business. Key Performance Indicators (KPIs) are essential because they measure success, drive strategic alignment, and improve decision-making. Unlike general metrics, KPIs focus on the most critical aspects of business performance, and is what you should track to improve certain aspects of the operations which in turn leads to improved overall business performance.
Summarized, KPIs help:
| Area | How | Example |
| Align business efforts with goals | KPIs ensure that teams and employees work toward company-wide objectives rather than just tracking random data points. | If the company’s goal is revenue growth, a KPI could be Monthly Recurring Revenue (MRR) to track consistent increases. |
| Provide focus and prioritization | KPIs help businesses avoid information overload by identifying the most important performance indicators. | A marketing team may track 100+ metrics (traffic, social shares, ad impressions), but a KPI like Lead-to-Customer Conversion Rate is what truly impacts business revenue. |
| Drive data-driven decision making | KPIs provide quantifiable insights that help leaders make objective, rather than gut-feeling, decisions. | If a KPI like Customer Churn Rate is increasing, leadership may reallocate resources to improve customer support or introduce retention incentives. |
| Improve accountability and performance | KPIs set clear expectations for employees and teams, making it easier to track progress and hold people accountable. | A sales rep with a KPI of 80% quota attainment knows exactly what is expected and can adjust strategies to meet the goal. |
| Enable continuous improvement | KPIs provide a benchmark for performance and allow businesses to continuously refine their strategies. | If Product Adoption Rate is lower than expected, the product team can analyze why customers aren’t using key features and make necessary improvements. |
Identifying Business Objectives
The first step in defining KPIs is to thoroughly identify the core objectives of your business. This involves a comprehensive analysis of what your business fundamentally seeks to achieve in both the short-term and long-term. Whether you aim to increase profitability by maximizing revenue and optimizing costs, it is crucial that your KPIs directly align with these overarching goals. This alignment ensures that every aspect of your business strategy is working cohesively towards achieving these objectives, thereby driving the success and sustainability of your business.
KPIs and strategic goals
Once business objectives are identified, it is imperative to ensure that your KPIs are in alignment with your strategic goals. This means taking a deliberate and thoughtful approach to selecting the right KPIs that will effectively measure progress towards your desired outcomes. Begin by examining each strategic goal and consider which KPI will provide the most relevant insights and data to inform your decision-making process.
The clue here is not to choose too many KPIs, as this can lead to information overload. Choose KPIs that are specific, measurable, achievable, relevant, and time-bound (SMART) to ensure they provide actionable insights.
Customer Segmentation for increased value
By segmenting customer data, customer segments can be tracked to provide information whether companies are performing well across segments. By looking at KPIs for each segments businesses can easily compare between them and get valuable insights related to each segment. This can help improving go-to-market strategies, product-market fit, etc.
KPI examples
Below are examples of key performance indicators (KPIs) that directly measure and impact the metrics we used as examples above: Annual Recurring Revenue (ARR), Monthly Recurring Revenue (MRR), and Churn. By clicking the tabs below you will learn more about Net ARR Growth rate, ARPA and Net Revenue Retention.
Net ARR Growth Rate
Net ARR growth rate measures how much ARR is growing over time, considering new sales, expansions, and churn.
Net ARR Growth Rate = ((Ending ARR−Starting ARR) ÷ Starting ARR )×100
Example: If ARR starts at $1M and grows to $1.2M, the growth rate is 20%.
ARPA - Average Revenue Per Account
Average Revenue Per Account (ARPA) is a KPI related to Monthly Recurring Revenue, and measures how much each customer contributes in revenue per month.
ARPA = Total MRR ÷ Total Customers
Example: A company with 500 customers and $250K MRR has an ARPA of $500.
Net Revenue Retention (NRR) Rate
Net Revenue Retention (NRR) is a KPI related to churn and overall customer success, and measures revenue retained after accounting for churn, upsells, and expansion revenue.
NRR = (Starting MRR + Expansion MRR − Churned MRR) ÷ Starting MRR) × 100
Example:
If MRR starts at $100K, loses $5K, but gains $10K in upgrades, NRR = 105%.
Sales KPIs
Sales Key Performance Indicators (Sales KPIs) are quantifiable metrics that help businesses measure sales performance, efficiency, and growth. They track everything from revenue generation and deal conversion rates to customer acquisition costs and sales cycle length. Tracking the right sales KPIs and sales efficiency metrics helps businesses optimize sales efforts, grow revenue, and build a scalable and efficient sales team.
In the tabs below we have listed a few examples of common sales KPIs, including Conversion Rate, Sales Cycle Length, Average Deal Size, Activity Metrics, Win Rate, Customer Acquisition Cost, Customer Retention Rate, among others.
Sales KPIs examples
Revenue & Growth KPIs
Total Sales Revenue
Total Sales Revenue measures total revenue generated in a period, and is displayed as a nominal value. By analyzing Total Sales Revenue, businesses can identify trends, evaluate the effectiveness of their sales strategies, and make informed decisions to drive future growth.
📌Why it matters?
Tracks overall sales performance and company growth.
Sales Growth Rate
Sales Growth Rate measures the percentage increase in revenue over time. By monitoring this rate, businesses can assess their ability to expand and capture market share. Sales Growth Rate = ((Current Period Revenue − Previous Period Revenue) Previous Period Revenue)) × 100
📌 Why it matters?
Indicates how well the business is scaling. A positive Sales Growth Rate indicates successful sales strategies and market penetration, while a declining rate may signal the need for strategic adjustments.
Recurring Revenue (MRR & ARR)
Recurring Revenue measures predictable revenue from subscriptions.
📌 Why it matters?
Essential for SaaS and subscription-based businesses. By focusing on these metrics, companies can better manage cash flow, plan for expansion, and ensure consistent revenue streams, ultimately leading to more strategic decision-making and enhanced investor confidence.
Sales Funnel & Conversion Metrics
Lead-to-Customer Conversion Rate
Lead-to-Customer Conversion Rate measures the percentage of leads that convert into paying customers. By analyzing this metric, businesses can identify which tactics are most successful in engaging potential clients and driving them towards a purchase decision. Conversion Rate = (Customers Acquired Total Leads) × 100
📌 Why it matters?
Helps evaluate lead quality and sales effectiveness. This insight allows for the optimization of marketing campaigns and sales processes, ensuring resources are allocated efficiently to maximize revenue growth.
Sales Cycle Length
Sales Cycle Length measures the average time taken to close a deal, typically in number of days. By measuring the average duration from initial contact to deal closure, companies can pinpoint bottlenecks and inefficiencies within their sales pipeline. Sales Cycle Length = Total Time Spent on Closed Deals Number of Deals Closed
📌 Why it matters?
A shorter cycle means higher efficiency and faster revenue generation. A comprehensive analysis of the Sales Cycle Length enables sales teams to implement strategies that reduce delays, enhance customer interactions, and ultimately accelerate the path to closing deals.
Average Deal Size
Average Deal Size measures the typical value of a closed deal, and is presented as a nominal value. By calculating the average monetary value of deals closed over a specific period, businesses can better understand their market positioning and the effectiveness of their sales strategies.
📌 Why it matters?
Helps assess whether sales reps are targeting high-value deals. This metric also allows companies to identify trends in customer spending, adjust pricing strategies, and tailor their sales approaches to focus on more lucrative opportunities.
Sales Efficiency & Productivity Metrics
Number of Calls/Meetings per Rep
Number of calls/meetings per sales rep tracks outreach activity levels. This metric provides insights into the level of engagement each rep has with potential clients, allowing managers to identify patterns and areas for improvement.
📌 Why it matters?
Helps optimize sales efforts and workload distribution. By analyzing these numbers, sales teams can ensure that their outreach strategies are effective and that resources are allocated efficiently.
Win Rate
Win Rate measures the percentage of closed deals vs. total opportunities, and reflects the sales team's ability to effectively convert opportunities into successful sales, highlighting the efficiency and effectiveness of their approach. Win Rate = (Deals Won Total Opportunities) × 100
📌 Why it matters?
A high win rate signals a strong sales process. By monitoring win rates, sales managers can identify successful strategies and replicate them across the team, while also pinpointing areas that may require additional training or support.
Time to First Contact
Time to First Contact measures how fast sales teams follow up on new leads. This metric
assesses the efficiency of a sales team's initial response to new leads, which can significantly impact the likelihood of conversion.
📌 Why it matters?
Faster responses = higher conversion chances. By minimizing the delay between lead generation and first outreach, sales teams can capitalize on the prospect's initial interest and engagement.
Customer Acquisition & Retention Metrics
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) measures the total cost to acquire a new customer. This number can differ quite a bit depending on which sales and marketing costs you include. Bentega suggest you calculate fully loaded CAC, meaning you include all relevant sales and marketing costs.CAC = Total Sales & Marketing Costs Number of New Customers Acquired
📌 Why it matters?
Helps businesses balance acquisition spending with profitability.
Customer Retention Rate (CRR)
Customer Retention Rate (CRR) measures how many customers stay over time. It provides valuable insights into customer loyalty and satisfaction, indicating how well a business is maintaining its existing customer base.
📌 Why it matters?
Keeping customers is cheaper than acquiring new ones. If you track this KPI per rep you can discover whether differences in how customers are followed up makes a difference.
Churn Rate
Churn Rate measures the percentage of customers lost over a period. By analyzing churn rate, businesses can identify patterns or reasons why customers are leaving, allowing them to implement targeted improvements.
📌 Why it matters?
High churn can hurt growth and indicate product or service issues, and seriously harm growth. Measuring this KPI per rep can help you identify any differences in how reps sell to customers.
Conclusion: The Power of Tracking KPIs & Metrics
Metrics and KPIs are essential tools for measuring business performance, optimizing strategies, and driving growth. While metrics provide a broad overview of data points across various functions, KPIs focus on the most critical indicators of success, ensuring businesses stay aligned with their goals.
By leveraging business metrics, companies can track key financial, operational, and customer-related trends. Meanwhile, KPIs help teams make data-driven decisions, improve efficiency, and enhance overall performance. In sales, for example, KPIs such as revenue growth, conversion rates, and customer acquisition cost directly impact success and profitability.
Ultimately, a strong understanding of KPIs and metrics empowers organizations to make informed decisions, optimize resources, and achieve sustainable growth. Whether monitoring sales performance, tracking customer retention, or evaluating marketing effectiveness, choosing the right KPIs is the key to continuous improvement and long-term success.
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