Key Performance Indicators (KPIs) Every Small Business Should Track

The essential KPIs Indian SMBs should track — sales (CAC, LTV), finance (gross margin, runway), and operations (cycle time, on-time delivery).

Sales KPIs: CAC, LTV, and Conversion

Customer Acquisition Cost (CAC) is total sales and marketing spend divided by new customers acquired in the period. Lifetime Value (LTV) is the average gross profit you earn from a customer across their entire relationship. A healthy business has LTV at least 3x CAC and a CAC payback period under 12 months. Conversion rate — the percentage of enquiries that turn into orders — is the leading indicator of sales health. Track conversion by channel (referrals, online, walk-in) to know where to invest more.

Finance KPIs: Gross Margin, EBITDA, and Runway

Gross margin is (Revenue - COGS) / Revenue, expressed as a percentage. For Indian SMBs, healthy gross margins are 35-50% for trading, 50-70% for services, and 25-40% for manufacturing. EBITDA margin (operating profit before interest, tax, depreciation) tells you the core operating profitability — aim for 10-20% as you scale. Runway is total cash / monthly burn rate, telling you how many months you can survive without new revenue. Below 6 months runway is a red flag that requires immediate action.

Operations KPIs: Cycle Time and On-Time Delivery

Order cycle time is the average days from order receipt to delivery — track this weekly to spot bottlenecks. On-time delivery percentage (orders delivered by promised date / total orders) is the truest measure of operational reliability and customer satisfaction. Inventory turnover (COGS / average inventory) shows how efficiently you convert stock to sales — higher is better, with 6-12x annual turnover being healthy for most retail and trading businesses. Returns and complaints per 100 orders signal quality issues early.

Cash and Receivables KPIs

Days Sales Outstanding (DSO) measures average collection period, and Days Payable Outstanding (DPO) measures how long you take to pay suppliers. The cash conversion cycle is DSO + Days Inventory Outstanding - DPO; shorter is better. Track current ratio (current assets / current liabilities) — keep it above 1.5 for safety. For cash buffer, aim for at least 2 months of fixed expenses as a reserve, scaled up to 6 months if your revenue is volatile or seasonal.

Build Your KPI Dashboard with BillBabu

BillBabu provides most of the data you need for an SMB KPI dashboard — monthly revenue trends, party-wise contribution, gross margin by product (when cost prices are entered), receivables ageing, and inventory levels. Export these reports into a simple Google Sheet, add a few calculated columns for CAC, LTV, and runway, and review weekly with your team. Consistent KPI tracking is the single most reliable habit separating SMBs that scale from those that stagnate.

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