What is business performance? Definition and examples

Every company wishes to have the best business performance possible. But what does that really mean? How to calculate it? And why is this term even more important in IT and service companies? We answer all these questions below!

Arkadiusz Terpiłowski

Co-Founder

Business Intelligence

12/9/2022

Business performance: how to measure and improve it?

Table of contents

What is business performance? Definition

In general, business performance is considered to be the company’s ability to profit from the resources and achieve its objectives. 

This is, however, a very broad definition. In practice, the term business performance usually refers to a company's achievements measured using a number of metrics known as key performance indicators (KPIs).

KPIs for business performance: examples

These KPIs may differ depending on the industry a given business is operating in. However, for a vast majority of the cases, major KPIs include: 

  • profitability, 
  • productivity, 
  • sales/profit/employment growth,
  • customer satisfaction ratings, 
  • traffic generated from different sources (i.e., SEO, websites, campaigns, etc.), 
  • order delivery, 
  • delivery time, 
  • a number of leads to be generated by marketing department, 
  • improving project statistics (i.e. for projects completed on time, within budget, etc.), 
  • increasing profit margin from an individual project or all the projects at once, 
  • improving market share. 

Business performance metrics: examples

Regardless of the type of business you run - from a vegetable shop to creating spaceships - the most important indicator of any business is profitability. 

If I were to compare it to chess the king would be revenue, but the queen would be profitability.

However, these metrics may also vary depending on the industry. For example, the typical business performance metrics for professional business services (IT, Digital / Marketing Agencies, Lawyer / Construction companies) are:

Financial:

  • Profitability (per client, project, group of specialists, per specialist)
  • Utilization Rate (planned, tracked with division to billable and non-billable)
  • Billable / Non-billable hours ratio
  • Speed of billing (krótsze - lepsze, dłuższe gorsze)

Customer satisfaction:

  • Projects Estimates to Actuals ratio
  • LTV

Employee satisfaction / Staff Market:

  • Employee retention
  • Hiring speed
  • Time of building new skills in organization

Of course, these are not the only objectives you can choose - you can adjust them to your operations as long as they reflect an important business value. 

Benefits of measuring business performance

If you do not measure how the things in your business operate, they might as well be nonexistent. In other words: without metrics, you do not even know whether they are worth the effort. 

Measuring KPIs and business performance in general is the first step to understanding your business on a more granular level and, as a result, quantifying it. 

But why to quantify it in the first place? 

Imagine an average CEO - let’s call him Josh. 

Josh managed a company employing 50 people, so he had quite a lot on his hands. Every month, he received a summarized report from his accountants showing that his company earned half a million dollars each month, with a profit margin of about 20%. It may look similar to this one: 

Profitability report can be used to measure business performance
Profitability report for a month generated in Primetric

However, one day Josh noticed that his margin had dropped in the previous month, despite the rising sales. Therefore, he started to analyze the costs generated by the entire company and quickly discovered that this analysis could not answer his question. 

Having been left with no valuable data, Josh was forced to do a reverse engineering for all the costs in his business to see the finances for each of his projects. After weeks of hard work, he discovered that half of the projects had not generated any profits in the last few months. Worse, their costs had been steadily increasing for quite a while. On the other hand, a few major projects were generating bigger profits and better margins and allowed their less successful counterparts to slip through the cracks. 

Had Josh kept track of each of his projects on a monthly basis, he would have noticed the poor financial performance of some of his operations. As a result, he could have saved some people lots of work and focus on acquiring the projects that help his business grow. 

That is why, above all the other reasons, business performance is so important. 

Apart from that, business performance can also give you: 

  • the ability to discover any arising problems before they impact company’s operations, 
  • the chance of identifying types of projects that are more or less beneficial than others, 
  • the opportunity to improve company’s profitability, 
  • improved transparency both for individuals and their managers, 
  • tracking the progress of individual project, as well as the entire company, 
  • an access to valuable indicators that can both point to challenges and opportunities within the company. 

Apart from that, measuring business performance is of great importance for service companies. They can use the method to monitor their projects better and improve their profitability on a micro scale. 

Therefore, you should not be like Josh - instead, you should focus on measuring business performance. 

Measuring business performance: how to do it? 

Business performance is all about metrics. However, to implement them, we need to know what to measure in the first place - unless you are interested in measuring the amount of coffee drunk every day in your office, of course. 

Fortunately, you can use our ready-to-implement guide to measuring business performance. 

1. Select the objectives

Before you start the main part of measuring business performance, you need to know which metrics are of the utmost importance for you, your project managers, and your business. 

However, even in the smallest companies there are dozens of different processes that can be measured - from particular projects, to the efficiency of employees. Now it’s time to determine which ones of them are really important. 

How to choose the right objective? 

Ultimately, every company, regardless of its specialization, strives to achieve three ultimate goals:

  • profitability - a sign of company’s growth and success, 
  • staff satisfaction and market for staff - acquiring and retaining employees, 
  • market demand - sales and acquiring the largest market share possible. 

These three objectives are surely familiar for your business, too. 

Now, you can take a closer look at them to identify metrics you can use for measuring business performance. 

For example, KPIs for profitability include: 

  • costs, 
  • margin rates, 
  • profits from particular operations (i.e. projects), 
  • overheads. 

Then, you can measure the condition of the market for staff using business performance metrics such as: 

  • utilization, 
  • available skills and vacancies, 
  • turnover rate, 
  • growth rate for your teams. 

Last but not least, take a closer look at the market demand and the needs of your customers. You can measure these types of goals with indicators such as: 

  • customer satisfaction, 
  • acquisition rate, 
  • profit per customer over the years (for long-time cooperation), 

Of course, you can add your own metrics to the list - every company has to adjust the indicators to its operations. 

2. Monitor the progress and optimize it

Once your objectives for business performance have been defined, you can start monitoring your company’s progress. 

However, you cannot just enter the meeting and tell your project managers to report everything they do - that will only cause chaos and misunderstandings. Instead, you need to: 

  • provide the managers with a business intelligence tool that will allow them to gather and exchange information without any additional effort. You, on the other hand, can access the data whenever you need. 
  • define the metrics they should pay attention to. Everyone may have a different understanding of terms your business wants to measure, depending on their background. To avoid confusion, define the terms you wish to focus on and give the entire company an access to this knowledge,
  • create a measurement methodology. In other words, make sure that your project managers measure the same metrics in the same way. If you’ve chosen the right tool in the first step of this list, you probably have such business intelligence insights right there. 
Project progress can be a base for business performance
Project progress report available in Primetric

3. Adjust the predictions

Whether you monitor a single project or the condition of the entire company, at some point you will certainly find something that simply didn’t go according to plan. That means it’s the time to adjust your predictions and metrics - or even your goals altogether.

First of all, whenever your objectives are not being met, you need to start to analyze and adjust the project process. By analyzing the metrics for business performance, you can spot any reliability, accuracy and validity issues that need to be addressed for the project to meet its goal. 

If the changes that caused the predictions to be misleading were not internal, you should focus on external factors. If your business has found itself in the middle of a crisis, or opposite, a great opportunity, you may want to update your objectives instead of the projects. 

Last but not least, if all else fails, you may want to take a closer look at the metrics you’ve chosen in the first place. Should you feel they are not reflecting the situation well enough, you can choose others to help you gain a better understanding of your company’s operations. 

How to improve business performance? 

If you read carefully, you already know how to measure business performance. But what if you already did that and it turned out that you have a lot of things to work on?

Well, in that case, we have a few tips on how to improve business performance for you. 

Track and improve statistics

Business performance is based on the data gathered from your business during its daily operations. Therefore, tracking the metrics it’s absolutely essential for it to be efficient. 

However, tracking statistics may have many faces. For example, you should: 

  • track worked time and compare them with planned hours, 
  • analyze the financials of all the operations, as well as overheads, 
  • keep track of the project calendar and project progress, 
  • analyze allocations and avoid benches, overtimes, and other undesirable situations, 
  • browse the project accounting details to control the finances, 
  • monitor any other indicators you find crucial for your projects. 

Of course, we do not recommend doing all of these things manually - instead, you can use Primetric’s features to automatically monitor business performance with all the key indicators. 

Report for tracked hours in Primetric
Example of reports in Primetric - a report of tracked time and its cost

Get everyone on the same page

People in your company, whether they are specialists or managers, may come from different backgrounds. As a result, they may understand key terms differently - and you, as an executive, should prevent that from happening. 

Before you focus on the technical aspects of business performance, explain the key indicators you are looking to measure to your team. If necessary, show them the formulas and factors that affect the results in the statistics. With that information, your employees will know exactly what aspects of their work they are to improve. 

Focus on transparency

Business performance is all about knowing what the company’s goals are. If you are planning on measuring it, you need to understand the underlying data. 

To do that effectively, you need to have a single source of truth that can provide you with all types of information you may want to measure. Whether it’s people, their working hours, projects or budgets, you have to compare and analyze the data to get a bigger picture of the operations and identify trends that could impact them. 

Of course, that cannot be achieved in meetings or a series of emails! 

To ensure that the information flow is swift and seamless, we recommend you to familiarize yourself with business intelligence tools. When picked carefully, they can gather the data from different departments and managers, providing executives with everything they need to make the right decisions. 

Start planning 

To successfully predict the future, you need to know how the projects and other endeavors are completed in your organization. For that, you need to plan them properly. 

Contrary to popular belief, planning is not limited to the schedule of a project. For business performance to be at its best, your company should also pay attention to: 

Capacity and allocations can act as one of the factors impacting business performance
Project calendar with allocations in Primetric

Work with the right people

Business performance highly depends on the people responsible for projects and other operations. Without their skills and, above all, honesty, your calculations may be misleading.

However, having the right people at your side is not enough to be successful at measuring business performance. To help them do their work properly, you also need a transparent resource management plan, as well as a tool that will provide them with the information on their work - both planned and tentative. 

People calendar in Primetric
People calendar with allocations available in Primetric

Communicate with stakeholders

To avoid any confusion in the future, you need to put your customers’ needs first - that’s why communication with your stakeholders is essential for your business. 

Every time you start a new project, accept a new deal or simply move on to another stage of an endeavor, make sure you and your customers are on the same page. Specify the requirements, define milestones and create a schedule to make sure that you can deliver projects on time, without wasting resources. 

Monitor business performance with Primetric! 

Staying on top of the business performance is not an easy task - but you do not have to complete it on your own. 

With Primetric, you have all the key information available at your fingertips. To add to that, the system is also capable of converting the data into graphics, charts and other advanced reports, giving you an overview of all the company’s operations. 

Do you want to see how it really works? 

Test Primetric or book a demo now! 

Arkadiusz Terpiłowski

Co-Founder

Arkadiusz is Head of Growth and Co-founder at Primetric. Prior to that, Arkadiusz was at the helm of his own software development company where he oversaw operations. A great enthusiast of process improvements, his personal mission is to make software companies more profitable and efficient on their path to growth.

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