The Ultimate KPI Cheat Sheet for Local Businesses (Or: How to Stop Guessing and Start Growing)
The digital marketing world loves its acronyms. CTR, CPC, CPM, CPL, ROAS, CPA, LTV, CAC... it's enough to make your head spin. But here's the truth: most of these metrics are distractions. As a local business owner, you need to focus on the handful that actually tell you if you're making money or losing it.
This is your plain-English decoder ring for marketing metrics. No jargon. No fluff. Just the KPIs that matter, what they mean, and what numbers you should actually care about.
The Only 3 Questions That Matter
- How much am I spending?
- How much am I getting back?
- Is that getting better or worse over time?
Every KPI below is just a different way of answering these three questions. Keep that in mind, and the alphabet soup starts to make sense.
The Metrics That Actually Matter
Cost Per Lead (CPL)
This is probably THE most important metric for local businesses.
What it is: How much you're paying, on average, to get one potential customer to raise their hand and say "I'm interested."
Formula: Total Ad Spend ÷ Number of Leads
Example: You spend $500 on Facebook ads. You get 25 phone calls and form submissions. Your CPL is $20.
What's a good CPL?
- Home services (plumbing, HVAC): $15-$50
- Gyms/Fitness: $10-$30
- Restaurants: $5-$15
- Professional services: $30-$100
Conversion Rate
What it is: The percentage of people who take the action you want them to take.
Formula: (Number of Conversions ÷ Number of Visitors) × 100
Example: 1,000 people visit your landing page. 50 fill out the contact form. Your conversion rate is 5%.
Why it matters:
A 1% improvement in conversion rate can double your ROI. If you're spending money on ads but your conversion rate is terrible, you're pouring water into a leaky bucket.
ROAS (Return on Ad Spend)
What it is: For every dollar you spend on ads, how many dollars in revenue do you get back?
Formula: Revenue from Ads ÷ Ad Spend
Example: You spend $1,000 on Google Ads. Those ads generate $4,000 in sales. Your ROAS is 4:1 (or 400%).
What's a good ROAS?
- Minimum viable: 2:1 ($2 back for every $1 spent)
- Good: 3:1 to 5:1
- Excellent: 5:1+
- Important: This doesn't account for COGS. Real profitability requires factoring in your costs.
Customer Acquisition Cost (CAC)
What it is: The total cost to acquire one paying customer (not just a lead, but someone who actually buys).
Formula: Total Marketing Spend ÷ Number of New Customers
Example: You spend $2,000 on ads. You get 100 leads. 20 of them become customers. Your CAC is $100.
The Golden Rule:
Your Customer Lifetime Value (LTV) should be at least 3x your CAC. If it costs you $100 to acquire a customer, they should be worth at least $300 to your business over time.
Click-Through Rate (CTR)
What it is: The percentage of people who see your ad and actually click on it.
Formula: (Clicks ÷ Impressions) × 100
Example: Your ad is shown 10,000 times. 200 people click. Your CTR is 2%.
Why it's overrated (but still useful):
High CTR doesn't mean you're making money—it just means your ad is interesting. But if your CTR is below 1%, your ad copy or targeting is probably off.
Customer Lifetime Value (LTV or CLV)
What it is: The total revenue you can expect from a customer over the entire time they do business with you.
Simple Formula: Average Purchase Value × Number of Purchases Per Year × Average Customer Lifespan
Example: Coffee shop customer spends $8 per visit, visits twice a week (104 times/year), stays loyal for 3 years. LTV = $8 × 104 × 3 = $2,496.
Why this changes everything:
If you know a customer is worth $2,496, you can afford to spend $200-$500 to acquire them. Without knowing your LTV, you can't make smart budget decisions.
The Vanity Metrics to Ignore
Don't obsess over these (they don't pay the bills):
- ✗ Page Likes/Followers: Unless they're buying from you, followers are just a number.
- ✗ Impressions: Being seen doesn't equal revenue.
- ✗ Engagement Rate: Likes and comments are nice, but they don't pay rent.
- ✗ Time on Site: If they're not converting, who cares how long they stayed?
Your Action Plan: Track These 3 KPIs to Start
Don't try to track everything at once. Pick these three to start:
1. Cost Per Lead (CPL)
Track this weekly. If it's climbing, your ads need work. If it's dropping, you're optimizing successfully.
2. Conversion Rate
How many leads become customers? This tells you if your sales process is working.
3. ROAS (Return on Ad Spend)
The bottom line: are you making more than you're spending?
Conclusion: Measure What Matters
Marketing measurement doesn't have to be complicated. Start with the basics: CPL, Conversion Rate, and ROAS. Track them consistently. Compare week to week, month to month. Make decisions based on data, not hunches.
The businesses that win aren't the ones with the biggest budgets—they're the ones who measure relentlessly and optimize based on what the numbers tell them.
Need Help Tracking the Right KPIs?
We'll set up proper tracking, baseline your current performance, and show you the 3-5 KPIs that actually matter for your business—no vanity metrics, just the numbers that drive growth.
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