What are key performance indicators (KPIs) and how can using them give you a better idea on how your business is travelling?

May 11, 2017

“’Key’ means main/important; ‘Performance’ – how are we doing?; ‘Indicators’ – as in a warning system. They are critical to every business and not having them is like driving a car with no fuel gauge, you never know if you are about to run out of petrol.

KPIs should allow us to make informed business decisions

KPIs help you measure the success of your business that way you know what’s going well and what needs improving. They are different for each business but the basic principle is the same – to understand the important aspects of your business so you can make effective, strategic and informed decisions and your business remains in good health.  

Choosing what to measure and identifying key areas

KPIs can be financial and non financial. Here are a few things below to consider.

Key area number 1: Cash flow

To get a clear idea of your cash flow you need to start measuring and managing it. You must focus on your cash flow and you should look at things like: debtor days, average margins, stock turn, lock up days and net profit percentages.

Key area number 2: Repeat customers

It’s great having new customers coming into your business. But it’s even more powerful actually knowing who is coming back time and time again, how often they are coming back, what they’re spending and on what. This way you understand your ability to generate recurring revenue. KPI’s to consider: Net % of attrition in customers, $ sales per customer, number of repeat customers, total value of customer returns.

Key area number 3: Monthly tracking of your sales to budget

Having a budget and comparing actual sales to budgeted sales is truly a powerful tool and measuring monthly revenue allows you to calculate how well your business is growing.

Key area number 4: What type of website traffic do you get?

Reviewing what areas of your website are being visited and collecting valuable data from people is important. A great way to collect data from people that visit your website is to have a free e-book. People will then have to provide name and e-mail to be able to receive it. What can you write about to really help your customers and potential customers?

Key area number 5: Referrals

Customer referrals are probably the most important KPI you’re not measuring. This indicator is important for a number of reasons, especially given that customer referrals and social media sharing have become a major driver of revenue for online and offline brands. Some KPI’s you should be looking at here are: Number of new customers per month, Customer satisfaction surveys, Number of customer complaints.

Once you have set goals and selected KPIs, monitoring those indicators should become an everyday exercise.

Contact us to find out how we can help you set KPIs up and monitor them on an ongoing basis.


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