- November 3, 2022
- Posted by: TechTAR Solutions
- Categories: Microsoft Excel, Power BI
Hello and Welcome back
Understanding industry Key KPIs is insufficient unless it is comprehended within the context of company and industry unit economics.
In this blog, I have compiled different KPIs that are commonly used in different industries and how it is commonly calculated.
Leave a comment below: What KPI would you add to the list for your industry? If your industry is not listed, please provide it below, along with one or two of the top metrics that your industry tracks.
1. CASH KPIs
Metrics Description Calculation
Cash Burn Rate Net Cash Spend by a company in a specific time frame (usually monthly or normalized to a year) Cash Spend (monthly average) - Cash Received (monthly average)
Average Days Delinquent (ADD) Measures effectiveness of collection efforts. Often used at client level to compare with the others Days Sales Outstanding (DSO) - Best Possible Days Sales Outstanding (BPDSO)
Operating Cash Flow (OCF) Money generated by daily operations Net Income + Non-Cash Expenses - Increase in Working Capital
Free Cash Flow (FCF) Expands on the OCF concept by also excluding interest payments and including asset purchases OCF - Interest Payments + Asset Purchase
Overdues Ratio Measures your effectiveness of collecting cash and the quality of your receivables Overdues / Total Receivables
Days of Inventory Outstanding (DIO) Average number of days that a company holds inventory for before turning it into sales Average Inventory / Yearly Cost of Goods Sold (COGS) * 365 days
Days Sales outstanding (DSO) Average number of days that it takes a company to collect payment for a sale Average Account Receivables / Annual Sales * 365 Days
Days Payables Outstanding (DPO) Average Number of days that it takes a company to pay its supplier Average Account Payables / Yearly Cost of Goods Sold (COGS) * 365 Days
Cash Conversion Cycle (CCC) Days to convert inventory into cash flow from sales DIO + DSO - DPO
Cash Reserves in Days Measures of how long your organization could survive if cash dried up tomorro Cash Reserves / Average Daily Expenses
2. Startup KPI
Metrics Description Calculations
Annual Recurring Revenue (ARR) ARR is the value of the recurring subscription revenue over the next twelve months. [Average Monthly Revenue Per Customer * Total Customers]*12
Bookings Bookings are a metric that tells the value of signed contracts with customers for a given period. Total Committed Revenue ( New+Renewals+Upgrades/Downgrades+Churn)
Burn Multiple The burn multiple measures efficiency and tracks how much revenue is generated for each dollar spent. Net Burn/Net New ARR
CAC Payback CAC payback is the time it takes to pay back the cost of acquiring a customer and is usually calculated in months. Cost of Sales and Marketing/(New MRR * Gross Margin)
Customer Churn Rate Percentage of lost subscribers / Customers over a given period. Customer Lost / Total Customer
Customer Lifetime Value (CLV) Revenue from a customer over the retention time period Average Revenue Per Customer * Customer Lifetime
Customer Retention Rate (CRR) CRR measures how many customers a
company retains over a certain period(Active Users in Period/Active Users in Prior Period)*100
Rule of 40 The rule of 40 is that a SaaS company's sum of growth and profit margin should exceed 40%. Growth % + Profit % >= 40
New Buyer Growth Rate Speed at which you can gain new customers over defined periods of time (New buyers this month - New buyers last month) / New buyers last month
Customer Acquisition Cost Amount of money a company spends to get a new customer Cost of Sales and Marketing / Number of New Customers Acquired
Net Burn rate Net cash spent by a company in a specific time frame (usually monthly or normalized to a year) Cash spend - Cash Received
Runway Time that a startup has before they run out of finance Current Cash Balance / Burn Rate
Average Revenue per user (ARPU) Average revenue generated per customer (either monthly or annually) Total Revenue / Total Number of Customers
SaaS Quick Ratio Compares revenue added (new business) vs revenue lost (Churn) New MRRt + Expansion MRRt) / Churned MRRt + Contraction MRRt)
Monthly Recurring Revenue (MRR) Monthly revenue from customers with a subscription Number of customers * Average billed amount
Total Addressable Market (TAM) Market Size of a product / service in value that the company can achieve Annual Contract Value per client * Number of Potential clients
3. Retail Industry KPI
Metrics Description Calculation
Sales Per Square Foot Helps determine how efficient you are at using store space. Net Sales/Store Square Footage
Sales Per Employee Sales generated per employee, helps with staffing stores. Net Sales/# of Employees
Average Order Value Average amount a customer spends per
order/transaction.Total Revenue/# of Orders
Customer Retention Helps in understanding the number of customers kept during a period. ((End of Period Customers - New Customers During Period)/Customers at
start of Period)*100
Conversion Rate Conversion Rate - Helps you understand how many people who visited your
store/website became a customer(# of Sales/# of vVsitors)*100
Inventory Turnover Number of times you turned over your inventory during a time period. Cost of Goods Sold/Average Inventory Cost
Gross Margin Return on Investment This tells you the profitability of
your inventoryGross Profit/Average Inventory Cost
Shrinkage Inventory lost due to theft, damage, or administrative errors. Ending Inventory Value - Actual Inventory Value
4. Service Industry KPI
Metrics Description Calculation
Billable Hours Leverage Measures what percentage of hours a partner
bills of the total hours worked.Total Billed Hours/Partner Billed Hours
Billable Headcount Measures what percentage of headcount is billable
headcount vs. support headcount# of Billable Employees/# of non-Billable Employees
Net Fee Revenue Per Partner Measures the amount of revenue being generated by each partner in the firm. Billable Hours Per Partner * Average Hourly Rate of Partners Team
Gross Profit Per Partner Measures the amount of Gross Profit each
partner is bringing in across their portfolio of businessRevenue Per Partner - COGS Per Partner
Average Gross Bill Rate Measures the average billable rate across the entire organization. $ of Billed Work/# of Hours to Produce the Work
Total Billable Hours This is the total number of billable hours for a time
period.Sum of All Hours Billed
Days Sales Outstanding Measures how long it takes to collect cash from your sales (Net A/R/ Sum of 12-Nonths of Net Revenue)*Days in the Year
Leverage Ratio This metric is useful for service business that have debt. Net Debt/TTM EBITDA
5. Manufacturing Industry KPI
Metrics Description Calculations
Overall Equipment Effectiveness Measures how effective your
equipment is at producing usable product.Quality*Availability*Performance
Throughput Measures how much a machine, factory, person is producing over time. Units Produced/Time
Units Produced/Time Measures how much capacity you're producing from your equipment vs. how much your equipment can potentially produce. (Actual Output/Potential Output) * 100
Yield This is a quality and performance KPI that measures how much of your product is usable. Usable Units Product/Total Units Produced
Scrap Scrap is the material that is discarded or rejected ruing the manufacturing process. Scrap/Total Product Run
Availability Measures the amount of time machines are working vs. the total time they should be working. Uptime/(Total Time)
Customer Return Rate Measures what percentage of goods is returned by
your customer and not caught during your quality check processGoods Rejected/# of Goods Delivered
On-Time Delivery Rate Measures ability to deliver product to client on-time # of Work Orders Delivered Ontime/Total Work Orders
6. Insurance Industry KPI
Metrics Description Calculation
Revenue Per Policyholder Measures the average amount of revenue
generated per policyholderTotal Revenue/# of Policyholders
Average Cost Per Claim The average amount paid out per claim filed by
customers.All Claim Costs/# of Claims
Return on Surplus Measures how much profit an insurance company can bring in relative to the revenue it generates from its policies. After-Tax Income & Capital Gains/Total Assets
Loss Ratio Measures the amount paid out in policy claims vs the total amount earned from all premiums. Total Policy Payouts/Total Revenue from Premiums
Expense Ratio Expense Ratio - The ratio of expenses excluding claim payouts vs total revenue earned from all premiums. Expenses Excluding Loss Payouts/Total Revenue from Premiums
Renewal Rate Measures the number of customers who renew the policy after the initial policy period is up Customers who renew policy/Total customers
Average Policy Size This is the average price or size of a policy during a given time period. Revenue from all policies/# of Policies
Underwriting Speed A measurement of the time it takes to review a policy and make an underwriting decision Days in underwriting of all policies/Policies Written
6. Headcount KPI
| Metrics | Description | Calculation |
|---|---|---|
| Headcount | Number of active people working for a company at a certain time | Number of active employees full time & part time + leasing employees |
| Full Time Equivalent (FTE) | 1 FTE equivalent of a standard working hours contract. Example: a part time at 50% = 0,5 FTE | Number of hours in the employee contract / Standard working hours |
| Turnover rate (also called attrition or churn) | Calculates the % of people leaving the company compared to the total number of employees | Number of departure over a period / Average total headcount |
| Natural attrition | Number of employees planned to leave the company based on the actual contractual situation | Planned retirement + Planned end of limited contract |
| Capacity | Calculates the number of hours available from direct workforce | Number of FTEs over a period x working hours available for one FTE |
| Capacity increase flexibility | Calculates how much capacity can be increase without having to recruit new employees | Flexible time account not used + Overtime + Temporary change of hours available in part-time contracts |
| Capacity decrease flexibility | Calculates how much capacity can be decrease without having to discontinue employment contracts | Flexible time account + Temporary change of hours available in part-time contracts + Temporary workers time |
| Noria effect | Effect of changes in compensation due to hiring and departures | (New hires salary costs - Leavers salary costs) / Previous salary costs |
| Absenteeism | Calculates the % of time not worked due to illness | Illness days / Total working days |
| Time to fill | Measures how long it takes to fill in an open position | Average number of days between job opening and contract signed by candidate |
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