Key Metrics in a Business Plan

… we measure our success like this …

What are Key Metrics?

Key metrics were introduced in the previous section on traction in a business plan. Consequently the purpose of the key metric section is to show the investor that the business has traction and momentum and is progressing over time towards its goals.

Additionally a key metric is sometimes referred to as key performance indicator or a KPI for short. Furthermore they vary from business to business and are chosen by management to be good indicators of success in the chosen industry.

Key Metrics Examples

To illustrate for example, key performance indicators for a subscription based (saas) business might include the following:

• Monthly visitors and growth rates
• Signups
• New paying customers
• Paying customer churn
• Paying customers at year end

or in contrast for a coffee shop business key performance indicators might be:

• Passing footfall
• Total customers
• Seat turnover rate
• Average Cover price

Key Metrics in Business Plan Sample

There is no set style to the KPI’s section, but the number of key metrics used should be kept to a minimum to avoid confusion, and is best shown in graph format. The example below shows the three most important KPI’s and provides a graph for each over an appropriate period of time, in this case five periods.

Summary

The purpose of the key metric section is to show what management consider the most important data to be tracked. By tracking the key metrics the business is able to monitor the progression of the business against its original projections. In doing so management is able to take early action to correct any issues which may occur as the business grows.

This post is part of the financial projections and Contents of a Business Plan Guide. The guide is a series of posts on what each section of a simple business plan should include. Additionally the next post in this series is about presenting the milestones in the business plan.