KPIs: Measures of success
How do you know if you’re succeeding in business? Sure, your total turnover may have increased this year, but did your costs go up as well? In other words, are you ACTUALLY better off than you were last year?
The only way to know this for sure is to consistently monitor and evaluate your business’s progress. After all, how can you take your business to new heights when you don’t know where you’ve been or how far you’ve come? Simple, you can’t! You’ll find yourself lost on the way to the summit.
That’s why when asked by clients about the best path to success I don’t start talking numbers and strategies. I start with Key Performance Indicators, or KPIs. A strategically chosen set of KPIs will not only help you assess your business performance, it will actually DRIVE you higher, FASTER. It’ll act like your compass, showing you how and where to take your business.
Be strategic to be successful
If you want to manage a business, you must manage the activities that make up that business. To manage these activities you must first be able to measure them. But, what do measure?
There are a slew of things a company could measure, from financial measures like inventory turnover and gross profit margin to non-financial measures like customer retention and satisfaction. It’s tempting to select them all – a common mistake! Ever heard the phrase you can’t see the wood for the trees? Well, this is a classic example. If you have too many KPIs, you’ll have an information overload and won’t be able to see the way forward.
Ask yourself these questions to select your KPIs effectively:
- Is it relevant?: The KPIs should be important to your business. What indicates success for you? Is it productivity of staff? Is it number of units sold? Is it customer referrals?
- Is it significant?: Will KPI improvements make a significant impact on business performance? Will it take you were you want your business to head?
- Is it measureable?: The KPIs must be able to be measured. Even if a qualitative KPI, can you think of a way to effectively quantify and accurately measure it?
- Is it actionable?: Are you able to take action to improve your KPI? It’s helpful to think about whether this is an actual factor to be addressed or a by-product of some other factors.
- What are your competitors measuring?: While this should be no means dictate what you measure, it can be helpful to see what your competitors are looking at. It can guide and inspire you to select the right measures for your business.
Why consistency is key
Now, for perhaps the most important piece of advice: don’t stop measuring. Having started my own business, I know firsthand the nonstop pressures of the daily grind. You’re so busy working IN your business that you don’t have time to work ON it… You spend so much time putting out small fires that you can’t focus on the big picture… Sound familiar?
Well, you’re not alone. It’s important to make the time and charge someone, whether yourself or an employee, with setting, monitoring and evaluating these KPIs. It’s one of the best, most effective way to grow your business.
It’s not always easy to get the time and perspective needed to do this. If you are in need of help building KPIs into your business, get in touch today for a free consultation. You have nothing to lose and loads to gain!
Upwards and onwards,