Business Analytics - Making Sense of Data to set KPIs

To many businesses, business analytics may be viewed as something complex.

But, if you really think about it, it’s just metrics that you must know or interested to know about your business.

For different businesses at different stages and industry the business, the metrics are different.

For Start-Ups, you can run simple calculations to measure your profits will increase or decrease with a change in each one of the following metrics:

Customer Lifetime Value

LTV or lifetime value of a customer is the revenue that a customer can generate for your startup over the lifetime of their membership.

In a subscription product, you can calculate LTV by first determining the customer value by multiplying the average purchase value by the purchase frequency. Multiply the average customer value by the average period (in months or years) that the customer is retained.

If you know how much money you can make from a customer, you will have a much clearer idea of how much money you should invest in acquiring a new customer.

Customer Acquisition Cost

CAC or customer acquisition cost is the money that you spend on acquiring a customer.

When you launch your startup with a new product and unknown brand, your CAC may be high, but as you understand your ideal customer, find your best performing marketing channel, and gain referrals through your early adopters, your CAC can start declining.

CAC includes your expenditure on sales, marketing, and distribution activities.

Churn Rate

Churn rate indicates the percentage of your paying customers that canceled their purchase. This is a metric that you should aim to keep as low as possible.

Customer Retention

Customer retention is the opposite of churn rate. It indicates the percentage of your paying customers that you retained, who renewed their subscription to your product.

High retention means you are delivering the promised value to your customers and they are happy with your product.

Cash Flow

Cash flow measures your costs versus revenue as it captures money going in and out of your business.

Positive or free cash flow indicates liquidity with more money flowing into the business than out of it.

Return of Investment

ROI or return on investment is a metric for calculating the gains or losses derived from an investment.

To calculate your return on investment in a new venture, project or initiative, divide your profits or losses by your total investment and multiply the result by 100 to get the ROI in percent.

Burn Rate

Burn rate means the amount of capital that a startup is spending or “burning” to finance operation.

The burn rate of a startup can depend on the business model, funding and growth strategy.


Revenue is the money that you generate through sales and is a measure of startup performance.

However, in many cases, revenue is not an accurate measure of your company’s financial health as it does not take into account business expenses.

Net Income

Your net income is the difference between your revenue and expenses. Paying close attention to your customer’s lifetime value, customer acquisition cost, churn rate, retention, cash flow, return on investment and burn rate will help you increase the difference between your revenue and expenses, thus run a profitable startup venture while understanding the key metrics that play a big role in boosting your company’s financial performance.

For traditional businesses, the concerns are usually related to operations. Some examples are as follows:

Financial KPIs for the Operations Manager

While operations managers and operations departments are generally concerned with increasing the efficiency of day-to-day operations, their efforts are often seen directly in financial performance metrics. As such, we have curated a list of example KPIs for operations managers delving into the financials of a company:

Accounts Receivables Turnover

This operational metric is used to quantify how well a company is able to collect on its receivables. Financial and operations managers will often use this measure as a leading indicator of market conditions.

Days Sales Outstanding (DSO)

When you really need to drill down into your accounts receivables to find out which clients aren’t paying their bills, you want to be tracking DSO. This metric tracks the average number of days it takes a client to pay after making a purchase. This metric is used to determine the quality of clients, helping decide which ones you want to continue doing business with in the future.

Operating Cash Flow

You expect most businesses to be profitable in their operations. If they aren’t, it won’t be a business for very long. This operations KPI tracks how much cash flow is being generated from day-to-day company operations.

Quick Ratio

The quick ratio is a financial metric that any operations manager should be familiar with. It is used to quickly check the financial health of a company by determining its ability to immediately cover its short-term liabilities.

Accounts Payable Turnover

Do you always pay your bills on time? Most people try to, just as most companies should try to pay their suppliers on time. This operational performance indicator tracks how many times a company pays off its accounts payable over a specified period. A higher number indicates that a company pays its obligations in a timely manner.

Cash Conversion Cycle (CCC)

Most operations managers keep track of the CCC metric as it indicates how long it takes a company to convert its inventory investment back into cash from selling said inventory. This KPI is comprised of three other KPIs: days inventory outstanding, DSO, and days payables outstanding.

Operating Profit Margin

The operating profit margin takes net sales and subtracts COGS and operating costs. This gives a better indication of company profitability as it takes operating costs into account.

Net Profit Margin

The net profit margin is the bottom line of income statement. It represents how much money the company made after subtracting all costs and comparing it to revenue. This is probably one of the most important metrics for operations managers in determining a company’s financial health.

Staffing Operational Metrics

It is important to always try and improve your financial ratios, but that doesn’t mean you need to be obsessed with them. Another equally important element to the company is your staff.

Employees are the backbone of any company.

You can have the best ideas, but without a team to implement them, ideas are just dreams. As such, it is important to understand your work force sentiment and how they are performing.

Here are some staffing KPIs for operations managers:

Absenteeism Rate

How many days a year are your employees calling in sick, or just flat out missing shifts? This operations metric helps identify employees that are disengaged at work so that you can bring them back to being an engaged employee. Engaged employees tend to work harder, have a higher retention rate, and help workplace culture flourish.

Overtime Hours

Depending on your situation, overtime could be a good thing as it means more pay, while for others, it could just mean longer hours for the same amount of pay. This operational performance indicator is worth tracking to identify individuals who may be overworked or having to pick up the slack for their coworkers.

Utilization Rate

Are your employees always working? Or are they waiting for work? Working on non-billable tasks? The utilization rate operations metric tracks how much an employee is actually working to make the company money. This is a key metric for professional services and consulting firms.

Employee Turnover Rate

The rate at which employees need to be replaced can fluctuate from industry to industry, or even between companies in the same industry. However, at the end of the day, it is important to understand why employees are needing to be replaced. This operations metric is often best analyzed in conjunction with the employee satisfaction KPI.

Response to Open Positions

This operational key performance indicator evaluates how well job postings are exposed and curated to their intended audience. It measures this by comparing the number of qualified applicants to the total number of applicants.

It doesn’t matter what industry you are in, hiring good staff is key.

But what if you could replace some of your staff with robots? The manufacturing industry is continually moving toward automation and away from manual labor.

Manufacturing Operational Key Performance Indicators

The manufacturing industry has been continually evolving since the industrial revolution. However, most of the KPIs that would have been applicable back when Henry Ford started manufacturing cars are the same ones we apply today. We just track them with higher precision and accuracy using specialized KPI dashboards. Here are some example KPIs for operations managers in the manufacturing industry:


This is one of the most basic operations KPIs for the manufacturing industry. It measures the rate of production of a machine, line, or plant over a time period. This helps the operations department determine their ability to meet production deadlines.

First Pass Yield

Every manager in the manufacturing industry will know this operations metric. It measures the percentage of products that are manufactured to specification, without requiring any rework (or being scrapped) the first time through the manufacturing process.

Demand Forecasting

Most people can’t see into the future with a crystal ball, but operations departments will often try to estimate future demand using forecasting. This operations metric is used by companies to estimate the amount of raw materials they will need to meet future customer demand.

Changeover Time

As an operations manager, changeover time can represent a number of different operational procedures. However, it fundamentally represents the amount of time required to switch from one task to another. Common examples of this are changing products on a production line, or staff during a shift change.

Takt Time

This operational metric represents the maximum amount of time that can be spent manufacturing a product while still meeting the production deadline. Operations managers use this in conjunction with other metrics when determining if they should take on an order.

Machine Downtime Rate

Most people associate downtime with a machine requiring repair, however, this operations metric is actually a combination of both scheduled downtime and unscheduled downtime. This metric is often used by the operations department to determine when assets require replacing.

Cycle Time

The cycle time performance metric tracks the average amount of time it takes to produce a product. This metric can be applied to a complete product, or each of the individual components for a product. When applying it to the components, this becomes a very powerful tool for streamlining production and increasing efficiency.

You are probably feeling a little overwhelmed with KPIs at this point. That is normal.

Most people use specialized dashboards to help them manage their KPIs and data.

Operational KPIs for the Distribution Team

Distribution, supply chain, and logistics are some of the most fundamental aspects of operating a company. However, we can clearly see that these are some of the most complex aspects as well. To help monitor this, we have generated a comprehensive list of operational KPI examples that should be applied to the distribution industry:

Perfect Order Rate

No one likes it when they receive an order that has a mistake in it. The sender also doesn’t like this as it means they may be incurring extra costs and have a dissatisfied customer. This operations KPI compares the number of perfect orders sent from a warehouse and compares it to the total number of orders.

Picking Accuracy

This operations KPI aims to reduce errors caused during the picking and packing process. It compares the number of properly picked orders vs. the total number of orders. As technology has developed, hand-picking has gone by the wayside. Picking is now completed largely by robots, causing this metric to improve steadily across the distribution industry.

Inventory Carrying Costs

As an operations manager, are you aware of the inventory carrying costs at each of your warehouses? This metric is often glossed over by operations departments as it can be a bit of a pain to track. The inventory carrying cost is calculated by adding up rent, utilities, salaries, opportunity cost, inventory costs, and insurance.

On-Time Delivery

The name really describes it all for this operations KPI. It compares how many deliveries made it to clients on time vs. the total number of deliveries. Many operations departments in the distribution industry will track this KPI as it gives an overall indication of how well the distribution network is functioning.

Dock Door Utilization Rate

When you are analyzing a distribution network, every aspect needs to be investigated. One of these aspects is the dock door utilization rate. This operational metric measures how efficiently the dock doors are being used. A low rate may indicate that there were more docks and warehouse space than necessary, while a highly fluctuating rate may indicate that better fleet management is required.

Space Utilization

A key component to any distribution network is the warehouse. How do you optimize a building? The space utilization metric measures the amount of space occupied by inventory in relation to the total space available. But what do you do when you run out of floor space? Look to the next metric to find out.

Storage Productivity

Our last operational KPI measured floor space utilization, which is helpful, but obviously warehouses can be fairly tall buildings. This metric compares the volume of inventory to floor area, meaning that you get better productivity by stacking higher. This is one of the most important metrics for warehouse operations managers.

Receiving Cycle Time

Another way warehouse optimization is measured is through the receiving cycle time metric. This operational key performance indicator monitors the average amount of time it takes the warehouse to process a delivery.

Fleet Asset Utilization

Utilization of your fleet is one of the most important aspects of distribution. Operations managers love to ensure their fleets are being utilized to the best of their ability. This operational performance indicator can help reduce a company’s capital cost, and/or help indicate when capital is required to expand the fleet.

The distribution team plays the important role of making sure clients get their products, but how do clients even find out about your products?

This is where the marketing department steps in.

Operational KPIs for the Marketing Department

Many companies spend exorbitant amounts of money on marketing, but how do they know if the campaigns are working? We believe that these are the key marketing KPIs for operations managers:

Cost-Per-Acquisition (CPA)

While it is important to see how many clicks you campaign gets, it doesn’t truly show how effective the campaign was. The CPA operational KPI only looks at how many new customers your campaign acquired for you, and at what cost.

Return on Advertising Spend

Most companies rely on large marketing budgets to increase their market share or bring about brand awareness, but how effective is the marketing? This operations metric compares revenue to marketing spend to measure your marketing department’s effectiveness.

Marketing-Originated Customer Percentage

Operations managers often use this metric to gauge the performance of the marketing department. However, this marketing KPI is best used in conjunction with the return-on-advertising spend metric. By combining these two operational metrics, you can drill down on your advertising performance.

Lead Conversion Ratio

Are you turning potential customers into paying customers? This operational KPI tracks how many leads convert into paying customers so you can see the efficacy of your funnel.

Regardless of Your Business Size, there is definitely Data.

If you don’t remember all of them, that is fine.

However, you should try to remember the operations KPIs that are relevant to your industry and how to efficiently track them using business intelligence software.

We hope the above information is useful to get you started on locating the relevant data in your company. If you have any questions about establishing required data point, BI software or KPI dashboards, get in contact with us!