Effective Key Performance Indicators (KPIs) help keep a business on track and guides a business on the journey towards its strategic goals.
A good KPI acts as a compass: a measurement of where your business is, relative to where it has come from and where it is going.
If you aim to succeed in your business and you lack the idea of how your business is performing then you should be ready to see all your profits slip down the drain.
The ideal thing is every business should be equipped with a healthy set of KPIs to know whether your efforts are paying off. KPIs help you determine if you’re spending too much time on something that’s not worth it and prioritize your tasks accordingly.
In this article, you’ll learn the important KPIs you should track for your business to steer in the right direction.
Here is a list of important KPIs every business should keep track of, for successful business growth.
Your KPIs need to be fully codified in a clear and meaningful way. General KPIs to track is how much money your business makes or how many customers you have.
1. Revenue By Service
Many start-up businesses provide a range of services. For instance, if you run a marketing agency that does everything from video campaigns to content and social media marketing, You should measure where most of your actual revenue comes from.
Understanding this will help inform you on how to market, grow and staff your business. If most of your revenue is coming from video production, it might be worth investing in that particular service.
Basically, you want to devote more time to the activities that make the most money and grow those particular services.
2. Revenue By Customer
As a start-up, you’ll probably be grateful for customers of any kind. But successful businesses are those that can identify their most valuable customers, nurture relationships with them and work towards bringing new customers with a similar profile.
By tracking revenue by customer, you can easily see those that are more profiting, and work to make those relationships even more profitable.
This will help you make a good judgment concerning which clients you need to give more attention to and keep happy.
3. Profit and Loss
Profit and loss analytics are simple and effective measurement of achievement. It gives you a record of your business income and expenditures over a particular period and shows a profit (income going above expenses) or a loss (where expenses exceed income).
Analyzing your P&L month-after-month, quarterly and annually can do a lot for your business:
Since as a small business you are working with a budget, monitoring where your cash is going in terms of expenses is important.
Clear P&L reporting can help you identify months that you tend to have much less work and make less cash; you can use it to build up cost-cutting strategies. Your P&L report is a great indicator of how your business is growing over time.
4. Customer Satisfaction & Loyalty
This is a non-financial KPI that should be right at your fingertips. It is important to measure customer satisfaction and loyalty level for every business because it’s always easier to get more business from a satisfied customer than to hunt for new ones.
You build customer loyalty by treating people how they want to be treated especially your high valued customers.
How do you know if they’re happy? Simply ask. A good customer satisfaction survey will give you a clear picture. It’s important you set your own target and track it over time. Set a standard operating procedure and then think about how you can add value to improve their satisfaction moving forward.
5. Operational Performance & Productivity
Measuring staff performance and productivity is an important metric to be tracked. You should be able to tell the performance of your staff.
Productivity ratios can be applied to almost any aspect of your business. From sales productivity to marketing or support productivity. Compare your productivity to your competitors and check yourself for continuous improvement.
Finally, with your KPI ready to review at any time, you can start picking out particular things you want to improve upon. Take the example of your customer turnover rate. If your business, in general, is performing well, but your customer turnover rate is very high, you would stand to benefit greatly from working to bring that rate down.
To do this, review your standard operating procedure, to figure out where you could address your customer’s concerns or deliver additional value. One simple fix could prove that you care about what your customers think and significantly lower your churn rate in the process.
KPI is key. The longer you run your business without clearly-defined and meaningful metrics, the more difficult it will be to figure out what you’re doing wrong (so you can fix it) and what’s going right (so you can do more of it). Get your important set of KPIs identified and tracked as soon as possible, and you can start nurturing them to improve your business where it counts.