5 KPIs You Need to Track to Improve Your Ecommerce Business

As an eCommerce seller, your job is to sell more, more, and more. If you aren’t selling more, then something’s wrong, right? And so, in an effort to sell more products, you run more ads, invest in more social events, experiment with new marketing channels, and so on. While these things may be giving you the results you want, the fact of the matter is that if you aren’t managing yourself, you can easily destroy your business.

Can you guarantee that every sale you make is profitable? If not, you might be digging yourself into a debt hole you cannot escape. That’s why it is so important for you to track KPIs (Key Performance Indicators) to know for sure if your efforts are keeping your business on the right and profitable path.

That said, let’s talk about some of the more important KPIs you need to track that you can use to improve your eCommerce business:

1. Revenue

This is perhaps the most obvious KPI to track, but it’s also the most important. After all, revenue is the lifeblood of any business.

There are a few different ways to track revenue, but the most important thing is to track it on a regular basis. This will allow you to see how your business is performing and to make necessary adjustments to your operations.

2. Costs of Goods Sold (COGS)

COGS is a key metric for any business, but it’s especially important for eCommerce businesses. This is because the cost of goods sold includes the cost of all the products that you sell, as well as the cost of shipping and handling.

Tracking your COGS will give you a good idea of how profitable your business is. It will also help you to identify areas where you can improve your operations in order to reduce your costs.

3. Gross Margin

Gross margin is a key metric for any business, but it’s especially important for eCommerce businesses. This is because the gross margin is a good indicator of how profitable your business is.

To calculate gross margin, simply take your revenue and subtract your COGS. This will give you your gross profit. Then, divide your gross profit by your revenue and multiply by 100 to get your gross margin percentage.

4. Customer Acquisition Costs (CAC)

Customer acquisition costs are the costs associated with acquiring new customers. This includes advertising, marketing, and any other costs associated with getting new customers to purchase from your store.

Tracking your CAC will help you to see how much it costs you to acquire new customers. This is an important metric because it will help you to see whether or not your marketing efforts are effective.

5. Lifetime Value (LTV)

Lifetime value is the total value that a customer will spend with your business over the course of their lifetime. The larger the LTV, the longer they’re with you.

This is an important metric because it helps you to see how much revenue you can expect to generate from each customer. This metric will help you see if you should focus on improving lifetime value to increase your profitability and more.

Conclusion

There are a lot of important eCommerce metrics to track, but these are the most important. If you’re not tracking these metrics, you’re not getting the full picture of your business. And, without the full picture of your business, you will never know whether your business is on the right track or headed straight to failure. So, make the necessary efforts to track the above KPIs and more to give you the information you need to grow your eCommerce business.

Ash CPA offers trusted CPA accounting and tax services that you can rely on to meet your needs without breaking the bank. If you are looking for an accountant in Framingham to help you grow your business, work with us today!