2017-03-15 00:00:00 Business Insights English Learn the difference between a vanity metric and an actionable metric and the best situation to use either measurement. https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/business-owner-looks-over-actionable-metrics.jpg https://quickbooks.intuit.com/ca/resources/business-insights/actionable-metrics-vs-vanity-metrics/ Financial Analysis: Actionable Metrics vs. Vanity Metrics

# Financial Analysis: Actionable Metrics vs. Vanity Metrics

A useful way to get to know more about your company is through metric analysis. Metrics are calculations or measurements that show how your company is doing in certain areas. Some metrics are more useful to be used within your company while other key performance indicators are most useful to people outside of your company. These two types of metrics  vanity and actionable metrics  should be used in different situations because they tell you different things.

## Use of Vanity Metrics

Vanity metrics are most useful in marketing or promotions. Because they’re high-level and easily understandable, your customers are more likely to relate to these numbers. Potential customers don’t care about your average cost to get each new customer. Instead, they’ll be interested in knowing you have 2,000 email subscribers.

## Actionable Metrics

Actionable metrics are used to make business decisions. They’re often more detailed, more specific to whatever is being analyzed and should be tracked over time to follow your progress. The average of money you spend to get every new customer is actionable because you should try to improve this number. It has a direct relationship on how you operate, so you should try to take action on making this average expense lower.

## Use of Actionable Metrics

You should use actionable metrics within your company. They have the most benefit when kept internal because they tell you what items you should take steps to improve. You can use actionable metrics like turnover ratios, activity ratios, response times to customer inquiries, and industry averages to improve your business. You’ll probably be asked actionable metrics when applying for a loan or trying to secure new investors. People putting money into your company will have more interest in knowing the more substantial facts about your business.

## Distinguishing Between Metrics

There are countless types of facts and figures you can use to measure your companys operations. It’s important to distinguish which are for vanity and which are actionable. Ask yourself if the fact or figure directly measures how your company is doing. Look for measurements that tell you about how your sales, spending, or customer interactions. Understand that knowing a vanity metric like social media followers has value, but realize that increasing your social media following is not your end goal. Use actionable metrics to improve your company and vanity metrics to easily communicate its success.

#### References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
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