In the current world we’re living in – measuring your KPIs are even more important. Every business is feeling the impact of COVID-19. Some sectors are experiencing a positive impact, a temporary sales uplift or burst of engagement, but a lot are negatively hit.
Whether your business is benefiting or losing out, it is vital to track the impact. With this information, reactive work and recovery planning can be better structured, leading to a more informed, more effective operation for you.
Why do KPIs matter?
Businesses – bigger ones, in particular, have been using key performance indicators, or KPIs, to measure their success for years. Yet many small businesses ignore this less understood acronym.
Focusing on a few simple KPIs creates a common goal for your business. Your employees can adopt the common language and gain an easy understanding of what you want to be done. Sure, they know the basics. But by getting simpler and more specific, you don’t force them to guess and make assumptions.
You also help them understand what impact they can have on the overall direction and goals of your business and how what they do day-to-day contributes.
What are KPIs used for?
- To monitor company health – KPIs are a scorecard for company health. Only measure what you want to move so you can put energy where you want to effect change. First make sure you choose the right KPIs for your business, then worry about who is accountable for them.
- To measure progress over time. Set targets at the beginning of each year, each quarter, and each month. Use KPIs weekly to measure your progress toward those goals. Ensuring your setting the right KPIs to help you measure your progress towards your long term goals and business strategy.
- To make adjustments and stay on track. In addition to your results, you also need leading indicators to let you know when you’re in danger of missing those targets before it’s too late. Leading indicator KPIs help you predict what will happen in the future and your future results. They let you know if you are on track to achieve the results you want. Leading indicators have two characteristics: they are measurable, and you can directly influence them. They are good KPIs to have to keep your projects on track.
- To solve problems or tackle opportunities. Use a combination of KPIs so you have the right information at your fingertips to solve problems or tackle opportunities. Let’s say you are in a sales slump. Identify a handful of KPIs that can help you turn the tide (maybe it is X number of outbound calls, X number of appointments kept, or X number of LinkedIn connections. Track them weekly to see if you’ve found the right lever that helps you generate more predictable sales. Or, let’s say you have a great idea for a new product. Maybe you test it out with a few clients and use KPIs to validate your business model before launching it on a large scale.
- To analyse patterns over time. If you measure the same KPIs quarter over quarter, you can begin to detect patterns in your numbers. There are countless ways these patterns can help you in your business. Maybe you can predict when your slowest quarter will be and use that time to do a system update or company-wide training initiative. Maybe you can tell that your sales manager always forecasts that you’ll come in five deals over or under where you usually end up at the end of the quarter. Maybe you can see that you’ve got some team members who are habitually under-performing or over-performing on their KPIs and can use this data to talk about consequences, bad or good.
What does a KPI look like?
A KPI is as strong as it is versatile. From measuring your finances, and evaluating employee productivity to the status of a job in progress, a KPI is a guide to help you achieve business success. Depending on what you want to accomplish in your business, your key performance indicators can shift based on goals, projects, and timelines.
A KPI measures the goals of the business against the actual, quantifiable data over a specified period. Even like-companies can have varied KPIs as not every business share the same goals and metrics.
Some common KPIs
- Revenue growth
- Revenue per customer
- Gross profit margin
- Customer acquisition cost
- Customer conversion rate
- Equipment utilisation
- Monthly sales growth
- Average interviewing cost
- Average length of placement
- Average length of service
- Average salary
- Average number of training hours per employee
- Average number of vacation days per employee
- Quote to close ratio
- Lead to sale percentage
- Average cost per lead
- Lead-to-Customer ratio