How to measure business growth: a practical guide
Guide
Rising turnover isn't the whole picture. Here's how to measure business growth: the numbers that show real progress, how to track them consistently and how to read them side by side.
Why bother measuring growth
Being flat out isn't the same as growing. Measuring turns a gut feel into figures you can compare period to period, so you know whether your changes are paying off. Your Xero, MYOB or QuickBooks file will hold most of them.
The core business growth metrics
Most small businesses can start with four:
- Revenue growth rate: how quickly turnover rises or falls between two periods. See how to calculate your revenue growth rate.
- Customer growth: the change in how many active customers you have.
- Customer retention: the proportion of customers who stick with you over a period.
- Gross margin: what's left of your revenue after the direct cost of what you sell.
What each metric tells you
| Metric | What it tells you | How often to check |
|---|---|---|
| Revenue growth rate | Are sales up on before? | Monthly or quarterly |
| Customer growth | Is the customer base expanding? | Monthly |
| Customer retention | Are customers sticking around? | Quarterly |
| Gross margin | Is growth making money? | Monthly or quarterly |
Reading the numbers side by side
One figure rarely tells you everything. Turnover can climb while margins thin out, or customer numbers can grow while retention slips. Check growth and quality measures together before drawing conclusions. Keep the seasons in mind too: a café's December quarter carries Christmas trading, and a retailer's June quarter carries EOFY sales.
Get your Growth Score
Pull these measures into one score and see where to focus next.
Frequently asked questions
How often should I check my business growth?
Monthly for fast-moving figures like turnover and new customers, quarterly for slower ones like retention, ideally in step with your BAS. Above all, use the same periods every time.
What's a good growth rate?
That depends on your industry, size and stage. Start by comparing with your own past results, then with similar businesses.