A KPI (key performance indicator) is a number that shows whether something important is going well. The key word is key: a good manager tracks a handful of metrics closely rather than dozens loosely. Here are the KPIs that appear most often in business reporting, grouped by area.
Revenue and growth
Revenue
Total income from sales in a period. Simple, but always clarify whether it includes taxes, shipping and refunds.
Revenue growth rate
(This period − Last period) ÷ Last period. Compare like with like: this March versus last March is often fairer than March versus February.
Average order value (AOV)
Revenue ÷ Number of orders. Raising AOV through bundles or upsells can grow revenue without more customers.
Profitability
Gross margin
(Revenue − Cost of goods sold) ÷ Revenue. Shows how much of each dollar remains after direct costs.
Operating expenses ratio
Operating costs as a share of revenue. Rising faster than revenue is an early warning sign.
Customers
Customer acquisition cost (CAC)
Sales and marketing spend ÷ New customers.
Retention or repeat purchase rate
The share of customers who buy again within a period. Keeping customers is usually cheaper than finding new ones.
Customer lifetime value (CLV), simplified
AOV × Purchases per year × Years as a customer. A rough estimate is still useful when compared with CAC.
Operations
- Inventory turnover: how quickly stock sells.
- Fulfillment time: order to delivery.
- Support resolution time: how quickly issues are solved.
How to choose your KPIs
- Start from a goal ("grow profitable online sales").
- Pick one or two metrics that show progress directly.
- Add one or two that warn you if something is breaking (refund rate, margin).
- Decide how often to review them and who is responsible.
Context makes KPIs meaningful
A number alone rarely tells a story. Always show it against something: a target, the previous period, or the same period last year. A scorecard reading "Revenue $48.2k, +9% vs Q1" is far more useful than "$48.2k".
Learn to build KPI scorecards in Week 3, and see our KPI glossary for quick definitions.
