The first step when it comes to measuring key KPI’s is to figure out what performance questions you need answers to. A KPI is only as valuable as the action it inspires. If you don’t know what you’re looking for, then it’s not going to be easy to figure out how to find it. While all of the below KPI’s may not work for every business, they are a great place to start and get you thinking. Do you need to know this information or should you be focusing on something else? Is this the information that is going to help you reach the next level of success? If you’re not measuring your performance and assessing what is working and what isn’t, success and growth will not come as easy.
6 Key KPI’s Your Business Should Be Looking At:
1. Net Profit: If you’ve been in business for a while, you’ve probably heard all about net profit, but the question is are you actually measuring it? Net profit is your bottom line; your income minus your expenses and if you’re not keeping track of it, you can find yourself in a world of financial trouble.
2. Revenue Growth Rate: How quickly are you growing? Measuring your company’s growth and sales revenue over a given time is an important metric for how well you are performing as a whole. It also allows for a way to compare your growth with that of your competitors as well as providing a measure of the extent to which your company is able to grow. This is helpful as you continue to expand your business.
3. Conversion Rate: This one is really important. How well are you converting inquiries into sales? Sure, your website may be getting tons of traffic, but if no one is buying you need to start questioning what is happening and a good place to start is with conversion ratios. How many prospects turn into customers and how many customers do you hear from again? It’s not enough to get the word out about your products and services, to stay in business you need to make a profit.
4. Customer Retention: Another important metric is customer retention which measures things like return business. Do you have loyal customers or do they normally purchase from you once and are never to be heard from again? Depending on your business, that may be normal but understanding how well your customers view your products or services and what changes you can make to better appeal to them– is an important indicator in improving your sales process.
5. Employee Engagement: We’ve spoken about financial KPI’s and customers KPI’s and now it’s time to turn to employee KPI’s. Without good employees, you’re left to carry the burden of your whole business–and that’s a recipe for disaster. You’ve probably heard that it’s important to create an environment that your employees can thrive in, but now it’s time to believe it and work towards it. If all your sales employees are miserable coming into work each day, trust us– it will have a negative effect on current and future customers. Take a survey and ask employees what they like best and least about working with the company. If you have employees on your team that you can trust, it’s much easier to take a step back and focus on the big picture.
6. Employee Turnover: Measuring employee turnover is vital in better understanding your hiring practices and processes and can offer greater insight into employee engagement as well. If the majority of your employees quit within one year, you should be questioning why there seems to be a revolving door with respects to your hiring practices. That metric could and should help you take the appropriate actions to remedy the problem and improve the overall turnover rate at your place of business. On the other hand, if the majority of your employees stay for 10+ years, other companies could learn a lot from the way you run your operation. Employee turnover is a major indicator of how well your business is performing– which should be helpful in implementing the right strategies for the future.
Running a business can be hard, but understanding your finances, customers and employees can help you be more successful- and the best way to understand this is by measuring key KPIs. The more you know, the better prepared you will be to make the kinds of decisions that will help you reach the success you’ve always dreamed of. Start measuring key performance indicators and get growing!
Click here to learn more about key KPI’s your business should be measuring and to find out how to become a better business owner.