Discover the 3 most important KPIs for your business right now!.
By Phil Ellerby
What gets measured gets done.
It’s a phrase which is sometimes overused in business, but it’s a simple rule which usually applies to most industries and sectors.
If you want your business to enjoy sustainable growth, it’s important to know the Key Performance Indicators (KPIs) which MUST be done well in order to achieve your forecasts and goals.
What are KPIs?
A Key Performance Indicator (KPI) is a way you can measure the value of a business objective by showing how effective it has been towards achieving a key goal.
By using KPIs in your business it can act as an early warning system which will notify you when targets have not been reached.
How many KPIs are there?
Broadly speaking, there is no actual limit on the number of KPIs which are available for business to use. In fact, there are a number of financial and non-financial measures which can easily be put in place to monitor performance.
They tend to fall into four main categories:
Financial KPIs: Factors which affect revenue, net income, cash flow, your balance sheet or any other kind of financial success fall into this category. They are usually very specific and measure the bottom line of your business.
Growth KPIs: Attracting new customers and winning new business is a big positive, regardless of which industry you operate in. By using KPIs to analyse growth factors you can focus on the areas of your business where more investment will reap an even bigger return.
Customer KPIs: It’s much easier to keep existing customers happy than it is to find new ones. Using KPIs to monitor customer satisfaction or the frequency of repeat purchases can help to reduce your ‘churn’ rate – and lessens the need to win new business.
Operational KPIs: These scrutinise the efficiency of your business and can lead to improvements in shipping or delivery times, the inventory of products and lag times.
Which KPI is best for my business?
Let’s be honest:
- We’d all love to know which KPIs have most impact on our business.
- Most of us don’t want to get too bogged down in KPIs and suffer from information overload.
Because when this is the case, one of two things happen:
- There are too many KPIs to focus on so we don’t do any (or they aren’t done properly).
- Compiling the KPI report becomes too much of a big job so we don’t do it (or don’t do it properly).
Either of these could be disastrous for your bottom line, which is why we advise that your KPIs must be specific and written on just one page. At Northern Accountants, this is what we refer to as a ‘One Page Plan’ – the Bible of business success.
A four-step plan to help prioritise your KPIs
Write down the three most important KPIs for your business to be a success. Make sure they are closely tied to the sector you are in as this will provide a more accurate picture of overall performance.
Look at the KPIs and decide whether they need to be successful in the short term or established if they are more in tune with long-term growth.
Decide whether immediate growth or long-term growth is more important to your business.
List the KPI with the most pressing needs first, place the least most important one at the bottom and put the remaining one into the second spot.
How often should I monitor my KPIs?
Once you’ve identified the three most important KPIs to focus on, you can then work out what data you’ll need (and how you’ll collect it) to measure them effectively.
Remember; only collect and track what’s most important. Complicating matters will only mean it doesn’t get done.
If you can monitor progress against your KPIs every three or six months, that’s great. Every month? Even better.
If targets are not being met, it’s important to resist the temptation to make knee-jerk reactions. Instead, identify the underlying cause of the problem and consistently focus on improving it every month.
It doesn’t matter what industry or sector you work in, putting this process into practice should allow you to start seeing a month-on-month improvement.
Using KPIs to grow your business
Make no mistake, using KPIs to improve your business will generate monthly actions – so select the ones you want to use carefully. Setting up this process can also be very time consuming.
However, the businesses we have worked alongside and done this with usually see an increase in revenue of between 10 and 25 per cent within six to 12 months. Imagine what that could do for your bottom line!
If you’d like to take the time and hassle out of finding your most effective KPIs, please call 0113 218 9552 or get in touch – we will happily help you carry out this task.