… we measure our success like this …
What are Key Metrics?
Key metrics were introduced in the previous section on traction in a business plan. The purpose of the key metrics section is to show the investor that the business has traction and momentum and is progressing over time towards its goals.
Key metrics, sometimes referred to as key performance indicators or KPI’s, vary from business to business and are chosen to be good indicators of success in the chosen industry.
For example, key performance indicators for a subscription based (saas) business might include the following:
Monthly visitors and growth rates
- New paying customers
- Paying customer churn
- Paying customers at year end
or for a coffee shop business key performance indicators might be:
- Passing footfall
- Total customers
- Seat turnover rate
- Average Cover price
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.
This is part of the financial projections and Contents of a Business Plan Guide a series of posts on what each section of a simple business plan should include. The next post in this series is about presenting the milestones in the business plan.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.