When measuring your company’s key performance indicators, which important metrics should you really be looking for?
Unfortunately, some business owners are focused on the singular concept of “sell more stuff” tunnel vision, where there is little concern over the key performance indicators (KPIs) of the business. Although more sales is a common goal, it can’t be achieved consistently without regard for strategy and tactics in the process. When measuring your own KPIs, you may want to ask the following five questions:
How will you measure success?
If your only goal is to grow revenue, then you’ll have an easy time tracking KPIs related to this performance metric. But, if client retention is as important as dollars coming in, or if minimizing workplace accidents to an acceptable level is the key driver, then determine how you’re going to measure these indicators.
Most companies have different KPIs for different campaigns. Client retention can be gauged by the frequency of re-orders after an initial client purchase. Safety can be measured by the number of days since an accident, or the resulting dollars lost due to an accident on the job. Make sure your KPIs are clear, or you’ll find it difficult to drive your team to successful outcomes.
What is most important to you?
Not all businesses operate in the same manner, so not all KPIs will be equally suited to all entities. You’ll need to start by determining what is important to you. Is market share the big piece? It is if you’re a bank. What about unit sales growth over the previous quarter? If you’re in manufacturing, that could be a big one. Additionally, while loyalty isn’t the easiest metric to measure, a loyal customer will generally buy more and stick around longer than a less loyal patron. Customer retention and gross sales – both from a unit perspective and total dollars earned – should be a part of any company’s KPIs.
Do your KPIs make sense?
Work your KPIs backward by first looking at the organization’s goals for the year. Ask yourself: Do your KPIs align with your business’ goals? Make sure your benchmarks are realistic given the timeframe and overall goals you’ve set forth. Keep seasonality or other business-specific modifiers in mind, too. The KPIs for one quarter may not be as fully applicable for the next.
Do your KPIs drive engagement?
Whether your company is driven by retail sales or you own or operate a physical location, one of the best indicators of a thriving business is robust engagement statistics – both on the client and employee sides. You can analyze bounce rates and time spent on your site with Google Analytics to see how engaged your average visitor is with your site. Take a look at click-through patterns and heat maps to see where on your page the visitor is clicking most frequently. This data will help drive your goals and make any necessary adjustments along the way.
Are your KPIs tied to your company’s future success?
While there is no such thing as having too much data on hand, you can run into trouble when you spend too much time focusing on the minutia, or items that are of little relevance to the business’ growth plan. Pare down your goals to several large and easily measurable benchmarks. Then, create tracking systems to keep close tabs on these indicators. You should know exactly where you should be, at any point in the year, in relation to these goals.
Use Data to Make Decisions
Now that you’ve determined what your KPIs should be and how to measure them, the real question is: How are you going to use the information gained? Are you simply monitoring progress toward a set goal, or are you keeping a close watch on the direction of the business in case you need to course-correct at any given time?
Remember, KPIs can be used to track performance, motivate team members, and enhance communication. By understanding what your key performance indicators are, how to track them, what to do with the information gained, and how to best react to KPI-related data, you’ll position your business for success.
Only through a deep understanding of KPIs can you drive the ultimate goal: optimal brand value. Do so, and you’ll create lasting connections with clients that will boost your business and create sustainable gains for years.