Running a successful business isn’t just about making sales, it’s about knowing the numbers that drive profitability. If you’re unsure where to start, tracking just three key performance indicators (KPIs) can make all the difference.
In this blog post, We will explore the most essential 3 KPIs every business owner should monitor. Also, you can grab a free Excel template to make it easy. Just enter your name and email to download the ready-to-use tracker.
1. Annual Sales Revenue:
Annual Sales Revenue is the total income your business earns from selling products or services over a year. It’s the starting point for understanding your overall financial performance.
Why it matters: This number reflects the demand for what you offer. A growing sales revenue usually signals business growth, while a decline could indicate issues with marketing, pricing, or customer retention. It helps you assess whether your strategies are working and whether it’s time to pivot or scale.
Tracking your annual sales revenue regularly gives you a clear picture of where your business stands. It’s a simple number that speaks volumes about your progress, helping you stay focused and make confident decisions.
2. Gross Profit:
Gross Profit is the amount of money your business keeps after subtracting the direct costs of making or delivering your product or service. These direct costs are also known as the Cost of Goods Sold (COGS).
Gross Profit = Sales Revenue – Cost of Goods Sold (COGS)
Why it matters: Gross profit shows how efficiently you produce or source what you sell. A higher gross profit means you’re controlling your costs well and keeping more of your revenue. If it’s low, you may need to look at ways to cut costs, improve pricing, or streamline operations.
Tracking gross profit helps you understand how healthy your business is at its core. It gives you the insight needed to improve margins and increase overall profitability.
3. Expenses as a Percentage of Gross Profit:
This metric shows how much of your gross profit is being used to cover your operating expenses, such as rent, salaries, utilities, and marketing.
Expenses % = (Total Operating Expenses ÷ Gross Profit) × 100
Why it matters: It helps you understand how much of your earnings are going toward running the business. A high percentage means expenses are eating into your profits, while a lower percentage means you’re keeping more of what you earn.
Tracking this number helps you spot rising costs early and find ways to reduce spending. It’s a simple but powerful tool to keep your business financially healthy and profitable.
Example of KPI Breakdown
Here’s a simple example to show how these three key numbers work together in a real business scenario. This gives you a clear picture of how revenue, costs, and expenses impact overall profit:
| KPI | Amount | Notes |
| Annual Sales Revenue | $1,000,000 | Total sales for the year |
| Gross Profit | $400,000 | After deducting $600,000 in COGS |
| Operating Expenses | $200,000 | Costs to run the business |
| Expenses as % of Gross Profit | 50% | $200,000 ÷ $400,000 × 100 |
This example helps you see how sales, costs, and expenses work together. Keeping track of these numbers makes it easier to understand how your business is doing.
Use These KPIs to Grow Smarter
Keeping an eye on these numbers gives you more control over your business. They help you stay focused and make better choices as you grow. Use these KPIs to:
- Set benchmarks.
- Spot trends early.
- Make informed decisions.
- Control costs.
- Improve profitability.
By tracking these KPIs regularly, you’ll see what’s working, what needs fixing, and how to guide your business in the right direction.
Business KPI Tracking Template
Use this easy-to-follow Excel template to stay on top of your business performance. Simply input your figures, and the key metrics auto-calculate for quick insights.
| Year | Annual Sales Revenue | Cost of Goods Sold (COGS) | Gross Profit | Operating Expenses | Expenses as % of Gross Profit |
| 2023 | $1,000,000 | $600,000 | =B2–C2 | $200,000 | =E2/D2 |
| 2024 | |||||
| 2025 |
How to Use This Template:
This Excel template is easy to use and saves you time on manual calculations. Just follow these steps to get a clear view of your business performance:
- Input your Sales Revenue and COGS.
- Gross Profit auto-calculates as Sales Revenue – COGS.
- Enter Operating Expenses (marketing, salaries, rent, etc.).
- Expenses % of Gross Profit auto-calculates as (Operating Expenses ÷ Gross Profit) × 100.
Once you fill in the numbers, the template does the math for you. It’s a quick way to stay on top of your business finances without any hassle.
Ready to Make Smarter Business Decisions?
Tracking KPIs doesn’t have to be complicated. With just a few key numbers, you can get a clearer picture of your business health and make confident decisions that lead to growth.
If you want to track your business performance with ease? Our free Business KPI Tracking Template makes it easy. You only need to enter your Sales Revenue, COGS, and Operating Expenses, the template will automatically calculate your Gross Profit and Expenses as a % of Gross Profit.
Click here and enter your name and email to get instant access to our free Business KPI Tracking Template, delivered straight to your inbox. Start making smarter, data-driven decisions today!