Discover The 3 Most Important KPIs for your Business Right Now!
What gets measured gets done.
It’s a phrase that is sometimes overused in business, but it’s a simple rule that 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) that must be achieved to achieve your forecasts and goals.
What are KPIs?
A Key Performance Indicator (KPI) measures the value of a business objective by showing its effectiveness in achieving a key goal.
Using KPIs in your business can act as an early warning system, notifying you when targets have not been reached.
How many KPIs are there?
Broadly speaking, there is no limit on the number of KPIs available for businesses to use. In fact, a number of financial and non-financial measures can easily be implemented to monitor performance.
They tend to fall into four main categories:
Financial KPIs: Factors that 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 your industry. By analysing growth factors using KPIS, 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 scrutinise your business’s efficiency and can lead to improvements in shipping or delivery times, product inventory, and lag times.
Which KPI is best for my business?
Let’s be honest:
- We’d all love to know which KPIs have the most impact on our business.
- Most of us don’t want to get too bogged down in KPIs and suffer from information overload.
When this is the case, one of two things happens:
- 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 work, 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
Step one
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.
Step two
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.
Step three
Decide whether immediate growth or long-term growth is more important to your business.
Step four
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 determine what data you’ll need (and how you’ll collect it) to measure them effectively.
Remember: Only collect and track the most important information. Complicating matters will only prevent it from being 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.
Implementing this process should allow you to start seeing month-on-month improvements, regardless of your industry or sector.
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 look into how we can support your business. Our CFO service is tailored to all aspects of your business.
