How to Choose the Right Metrics to Measure Your Business

Choosing the right metrics to include in your dashboard is the most important part of building an effective business performance dashboard.

There are two factors to consider when choosing metrics:

  • How many metrics should be included?
  • Which metrics should are most important?

In this post we’ll explore each of these and explain how many metrics the ideal business performance dashboard should include in addition to how to decide which metrics are the most important.

This is the most involved – and most important – step in building an effective dashboard that will drive your business forward.

Determining The Right Number of Metrics

Anywhere between 3 and 7 metrics is the sweet spot when building an effective and useful dashboard. Any fewer than 3 metrics and there is little reason for creating a dashboard and more than 7 metrics can cause the dashboard to become cluttered and the value of focusing on key metrics is lost entirely.

If you find it difficult to limit the number of metrics remember that you can create composite metrics – metrics that are built from a combination of other metrics. For example, a metric of daily sign ups could be totaled over 7 days to form a weekly sign ups metric.

Using aggregate functions (summation, average, high/low) is a great way to minimize the number of metrics while extracting the real value and meaning from the data.

Focusing on as few metrics as possible allows you to stay in tune with the key performance indicators for your business. The metrics that drive performance and results for your organization are the ones that will have the most impact and make your dashboard valuable and propel your business forward.

Deciding on the metrics that matter the most can be challenging. Here’s a simple exercise that you can do by yourself or with your team to help identify the most important metrics by using the following matrix.

Business Dashboard Metrics Matrix

Step 1 – Brainstorm Every Possible Metric

Think of every metric you could track and write each one on it’s own post-it note. Keep thinking of as many as you can – you should have 20-30 at a minimum. If you get stuck, take a short break and keep writing down more metrics as you think of them.

Step 2 – Determine Which Metrics Are Important

Next, separate each of the metrics you’ve come up with into either the Important row or the Not Important row. You can do this by putting them into piles on your desk or by placing them onto an empty wall and using masking tape to draw the lines of the matrix.

When thinking about which metrics are important, remember that an important metric is one that moves the business forward. For example, number of requests for information, average donation size, number of sales, etc.

Another way to think about it is to imagine that the metric suddenly took a turn for the worse – would it significantly impact your business? For instance, if the number of weekly appointments with customers suddenly dropped off that would be an immediate red flag.

Step 3 – Separate by Availability of Data

Now that you’ve separated the metrics by importance the next step is to further divide them based on whether or not you already have the data needed to report on that metric.

For instance, if you had the metric “Percentage of deals closed” you need to figure out if you currently track that and have the data available.

If you don’t have the data, or are unsure, place the metric into the quadrant for Important But No Data. We’ll revisit these in the next step but your focus for now is simply to determine whether or not the data for these metrics is something that’s currently available.

Step 4 – Choosing Your Metrics

With all of the metrics sorted into one of the quadrants of the matrix it should now be clear which metrics you must focus on – the metrics in the Important row.

However, there are probably still too many metrics. Remember, between 3-7 metrics is usually ideal.

To further narrow down the metrics and choose the right metrics for your dashboard you can evaluate the metrics in the Important But No Data quadrant.

If you want to include any of these metrics you will need to start collecting the data necessary or find a way to get the data into your dashboard. Re-evaluate the metrics in this quadrant to decide if they are as important as the rest and if the effort to track and record this data can be justified.

Finally, consider choosing a mix of the type of metrics to include in your dashboard.

Some metrics are predictive indicators – for example, the number of requests for information can help you predict what may happen (more requests will lead to more meetings and therefore more sales).

Other metrics are lagging indicators showing what has already happened – number of sign ups this week, for example.

By having a mix of the types of metrics you choose for your dashboard you’ll be able to get a more complete view of the performance of your business.