Unlock Your Business's Potential: The Top 7 KPI Metrics for Inventory Control Software on Subscription

Welcome to our latest blog post, where we delve into the Top Seven Inventory Control Software on Subscription KPI Metrics. If you're running a business, it's essential that you keep track of the metrics that really matter. Otherwise, how can you make informed decisions?

As a serial entrepreneur, I've been keeping a close eye on the latest statistics, and the results are in. We've found that there are seven core KPIs that every business owner should be tracking when it comes to inventory control software on subscription.

• Number of active subscriptions: This metric gives you insight into how many customers are currently using your inventory control software. It's a great way to measure your software's popularity and determine how well it's performing in the market.
• Subscription renewal rate: Knowing how many customers are renewing their subscriptions over time can help you predict future revenue and provide valuable insights into customer satisfaction.
• Average revenue per user: Calculating the average revenue per user (ARPU) can help you determine the profitability of your business. Tracking ARPU over time can help you identify trends and optimize your pricing strategy.

But that's not all! There are four more essential KPIs that we'll be discussing in our post. So, if you want to learn more about how to track and calculate these important metrics, keep reading!

Number of active subscriptions

As a business owner, it is vital to keep track of your subscriptions. The Number of Active Subscriptions key performance indicator (KPI) is a metric that measures the total number of ongoing subscriptions at any given time. This KPI is essential for businesses that offer subscription-based services, such as software as a service (SaaS) or subscription boxes.

Definition

The Number of Active Subscriptions KPI is the total number of ongoing subscriptions at any given time. This metric includes both paid and free subscriptions, but only active subscriptions are counted. An active subscription is defined as a customer who has made at least one payment and is currently using the service.

Use Case

The Number of Active Subscriptions KPI is a critical metric for businesses that sell subscription-based services. This KPI helps businesses understand the overall health of their subscription business and can help identify potential issues. For example, a drop in the number of active subscriptions could indicate a problem with the product or service, customer service, or billing.

How To Calculate KPI

To calculate the Number of Active Subscriptions KPI, simply add up the total number of active subscriptions. The formula for this KPI is:

Calculation Example

Let's say you run a business that offers a SaaS product. You have 1,000 paid active subscriptions and 500 free active subscriptions. The total number of active subscriptions would be:

Therefore, your Number of Active Subscriptions KPI would be 1,500.

KPI Advantages

• Helps businesses understand the overall health of their subscription business.
• Identifies potential issues with the product or service, customer service, or billing.
• Provides insight into customer retention and churn.

KPI Disadvantages

• Does not take into account the revenue generated from each subscription.
• Does not provide insight into the profitability of the business.
• Does not account for new subscriptions or cancellations.

KPI Industry Benchmarks

Industry benchmarks for the Number of Active Subscriptions KPI vary depending on the type of subscription-based business. However, a healthy subscription-based business typically has a high number of active subscriptions and a low churn rate. A churn rate of less than 5% per month is considered acceptable.

Subscription renewal rate

Subscription renewal rate is a crucial metric that measures the percentage of customers who renew their subscription to a company's products or services for a certain period. It helps businesses identify how successful their subscription-based revenue model is and whether customers are satisfied with their products or services.

Definition

The subscription renewal rate is the percentage of customers who renew their subscription within a specific timeframe. It is calculated by dividing the number of customers who renew their subscription by the total number of customers who were up for renewal within the same period.

Use Case

The subscription renewal rate KPI is useful for subscription-based businesses such as software companies, online services, or streaming platforms to understand their customer retention rate. By tracking this metric, businesses can identify how effectively they communicate the value of their products or services, and whether customers are satisfied with the quality of their offerings.

How To Calculate KPI

To calculate the subscription renewal rate KPI, use the following formula:

Calculation Example

Suppose your software company has 1,000 customers who were up for renewal in a given month. Of those, 700 renewed their subscriptions, and 300 decided not to renew. To calculate the subscription renewal rate:

KPI Advantages

• The subscription renewal rate is an essential metric for subscription-based businesses as it indicates customer retention and loyalty.
• It helps businesses evaluate the effectiveness of their marketing and communications strategies and identify areas for improvement.
• It provides insights into customer satisfaction and whether they perceive that their subscriptions provide value for money.

KPI Disadvantages

• Subscription renewal rates do not provide insights into customer behavior beyond their subscription renewal decision.
• This metric does not consider the quality of customer experience or customer support that can impact customer retention rates.
• It alone is not sufficient to assess the financial health of a business, and it should be viewed in conjunction with other key performance indicators.

KPI Industry Benchmarks

Subscription renewal rates vary by industry, and it is crucial to compare your company's renewal rate to the industry benchmark. For instance, according to the Subscription Economy Index, the average renewal rate for the software industry is around 80%, whereas the consumer goods industry has an average renewal rate of around 40%.

Average revenue per user

As a serial entrepreneur who has started and run several businesses, I understand the importance of inventory control in maximising profits. One of the key metrics that you should be tracking is the average revenue per user (ARPU), which is a measure of how much revenue is generated by each individual customer.

Definition

The ARPU metric represents the average amount of revenue generated by each individual customer of a business. This is calculated by dividing the total revenue generated by the number of customers or subscribers.

Use Case

ARPU is an essential metric for subscription-based businesses that need to track the profitability of their customer base. By calculating the ARPU, businesses can identify which customers are the most valuable to them and adjust their marketing strategies accordingly.

How To Calculate KPI

To calculate ARPU, use the following formula:

Calculation Example

Let's say that your business generated $50,000 in revenue and has 1,000 subscribers. To calculate the ARPU, plug in the numbers:

So, the average revenue generated per user is $50.

KPI Advantages

• ARPU helps businesses track the profitability of their customer base and make informed marketing and pricing decisions.
• It enables businesses to identify which customers are generating the most revenue and target them more effectively.
• ARPU is a simple and straightforward metric to calculate, making it easy to track over time.

KPI Disadvantages

• ARPU does not take into account the expenses associated with acquiring and retaining customers, which can impact the overall profitability of the business.
• It may not be a useful metric for businesses that have a wide range of products or services at different price points, as this can skew the results.
• ARPU can be affected by seasonality and other external factors, making it less reliable over shorter time periods.

KPI Industry Benchmarks

The average ARPU can vary widely depending on the industry and business model. For example, a software-as-a-service (SaaS) business might have a higher ARPU than a music streaming service. To get a better sense of what the industry benchmark is for your business, you can consult industry reports or seek the advice of industry experts.

Inventory accuracy rate

Inventory accuracy rate is a crucial KPI metric for inventory management that determines the percentage of times the inventory recorded in the system matches the actual physical inventory. Inventory accuracy rate plays a significant role in measuring a company's efficiency in inventory management.

Definition

The inventory accuracy rate shows how accurate a company's inventory records are to the actual inventory available. It measures the percentage of times inventory records are correct as compared to the physical count of items in stock.

Use Case

Inventory accuracy rate is used to identify discrepancies between the physical inventory and the inventory records. A high accuracy rate indicates that the inventory records are reliable, and the company can rely on them for its operations. In contrast, a low accuracy rate might indicate the need for a thorough inventory audit, leading to the identification of the root cause of discrepancies.

How To Calculate KPI

To calculate the inventory accuracy rate, you need to have a count of the actual number of items on the shelves and compare them with the recorded inventory numbers. The formula is:

Calculation Example

Let's assume a company has a recorded inventory of 1,500 and an actual count of 1,450. The inventory accuracy rate would be:

KPI Advantages

• It identifies discrepancies between the physical inventory and inventory records
• It helps businesses in reducing inventory shrinkage
• It enables accurate forecasting and planning of inventory needs

KPI Disadvantages

• It might not consider discrepancies caused by theft or damage
• It might require frequent physical inventory counts

KPI Industry Benchmarks for the KPI: ' Inventory accuracy rate '

The ideal inventory accuracy rate varies from industry to industry. However, a benchmark inventory accuracy rate should be at least 95% for most businesses.

Number of inventory adjustments needed

As a serial entrepreneur, I have learned the importance of tracking inventory control and utilizing key performance indicators (KPIs) to stay on top of business operations. One crucial KPI to measure is the number of inventory adjustments needed.

Definition

The number of inventory adjustments needed tracks the frequency and quantity of adjustments made to inventory records to match actual inventory levels in the warehouse or storage facility. It helps businesses identify areas for improvement in their inventory management processes.

Use Case

This KPI is particularly useful in industries with high inventory turnover rates, such as retail and e-commerce. It ensures that inventory levels are accurate, and businesses can quickly identify discrepancies, such as theft or inaccurate record keeping.

How To Calculate KPI

Calculation Example

Let's say Company X made 20 inventory adjustments in the past quarter, and their total inventory count was 500. To calculate the number of inventory adjustments needed:

So, Company X made inventory adjustments equivalent to 4% of their total inventory count, indicating the need for improvement in their inventory management process.

KPI Advantages

• Helps identify areas for improvement in inventory management processes
• Ensures accurate inventory levels
• Identifies discrepancies, such as theft or inaccurate record keeping

KPI Disadvantages

• May not work for businesses with low inventory turnover rates
• Does not take into account variables, such as seasonality or changes in demand
• May require frequent adjustments, increasing overhead costs

KPI Industry Benchmarks

The number of inventory adjustments needed varies by industry, business size, and other variables. However, for businesses with high inventory turnover rates, a target of 2-5% is common for this KPI.

Time spent managing inventory

Inventory control software is essential for businesses of all sizes. One of the primary key performance indicators (KPIs) for tracking inventory is the time spent managing it. This KPI can help businesses understand how much time and effort they are dedicating to inventory management and identify areas for improvement. In this chapter, we will explore the definition, use case, how to calculate, calculation example, KPI advantages, KPI disadvantages, and industry benchmarks for the KPI: 'time spent managing inventory'.

Definition

The time spent managing inventory is the amount of time and effort a business puts into managing its inventory. This KPI measures the total hours spent on inventory-related tasks, including tracking inventory levels, ordering products, receiving shipments, conducting audits, and resolving discrepancies.

Use Case

The time spent managing inventory KPI is essential for businesses that want to improve their inventory management processes. By tracking the time spent on inventory-related tasks, businesses can identify areas where they are spending too much time and allocate resources to areas that need improvement. Additionally, this KPI can help businesses optimize their inventory levels and reduce stockouts.

How To Calculate KPI

To calculate the time spent managing inventory, divide the total number of hours spent on inventory-related tasks by the total number of products sold during that same period. The formula for this KPI is:

Calculation Example

Suppose a business spent 200 hours managing inventory during the month of January and sold 1,000 products during that same period. The time spent managing inventory KPI for January would be:

KPI Advantages

• The time spent managing inventory KPI provides businesses with visibility into their inventory management processes.
• By tracking the time spent on inventory-related tasks, businesses can identify inefficiencies and make improvements.
• This KPI can help businesses reduce stockouts and improve customer satisfaction.

KPI Disadvantages

• The time spent managing inventory KPI does not account for the complexity of inventory-related tasks.
• This KPI does not consider the size of a business or the industry it operates in.
• Businesses need to ensure that the data they use to calculate this KPI is accurate and up to date.

KPI Industry Benchmarks

The time spent managing inventory KPI varies depending on the size of a business, the industry it operates in, and the complexity of its inventory management processes. However, here are some industry benchmarks for this KPI:

• Manufacturing: 0.5-1.5 hours per product
• Retail: 0.1-0.3 hours per product
• E-commerce: 0.05-0.2 hours per product

Customer satisfaction rate

In today's competitive business landscape, tracking customer satisfaction rate has become crucial for businesses to sustain and grow. Measuring customer satisfaction rate helps businesses to identify the areas where they need to improve and enhance their customers' experience. In this chapter, we will discuss how to track and calculate the Customer satisfaction rate KPI and its industry benchmarks.

Definition

Customer satisfaction rate is a KPI that measures how satisfied customers are with a company's products or services. It helps businesses to understand their customers' needs and expectations and to improve the customer experience. A high customer satisfaction rate indicates that customers are happy and satisfied with a company's offerings.

Use Case

Customer satisfaction rate is critical for businesses that rely on customer loyalty and retention. It helps businesses to retain their existing customers and attract new customers by providing them with an exceptional customer experience. Companies that track this KPI can easily identify the areas where they need to improve their products or services to enhance customer satisfaction.

How To Calculate KPI

To calculate the Customer satisfaction rate, divide the number of satisfied customers by the total number of customers and multiply the result by 100.

Calculation Example

Let's assume that a company has 100 customers, out of which 80 are satisfied with their products and services. To calculate the customer satisfaction rate, we will use the formula:

Therefore, the company's customer satisfaction rate is 80%.

KPI Advantages

• Helps businesses to identify areas of improvement
• Assists in retaining customers and building loyalty
• Provides insights into customer needs and expectations

KPI Disadvantages

• May not reflect the overall customer experience
• Depends on the customer's mood and perception
• May not represent all customers' opinions

KPI Industry Benchmarks

The customer satisfaction rate industry benchmark varies depending on the industry type and the products or services offered by a company. However, in general, a customer satisfaction rate above 80% is considered excellent, while anything below 60% is considered unsatisfactory.