What Are Business KPIs and Why Tracking Them Is Important
The business world can be daunting because it’s not black and white. Which is why KPIs (Key Performance Indicators) are so important! They give your business a quantitative way to track whether or not you’re making headway toward your goals.
So what are KPIs? Why are they so important? How do you decide what KPIs to track in your business? I’m excited to answer these questions and get you on your way to profitability in your business.
What are KPIs?
KPI stands for Key Performance Indicator and there are quite literally hundreds of them your business could track. (We’ll dive into determining which KPIs make the most sense for your business to track a bit later.) KPIs should always tie directly back to the strategic objectives of your company. When they are made known to everyone within your business, it helps your team members to keep your objectives at the forefront of their minds. There is never any question about what goals everyone is working toward. They also give black and white numbers to judge the effectiveness of your teams efforts.
KPIs go hand-in-hand with metrics. Metrics are the tactics used to achieve the KPIs, while KPIs let you know how your business is performing against your strategic goals.
Why are KPI's so important?
When KPIs are done correctly they directly impact the growth of our business. Here’s how:
- KPIs give you quantitative data to determine how your business is tracking toward its goals.
- When team member are aware of KPIs all decisions can be made in order to hit specific data points.
- If targets aren’t being hit or trending in the right direction, pinpointing problem areas is easier.
- Monitoring the ‘health’ of your businesses is easier.
- It’s easier to analyze patterns over time within your business.
How do I decide what KPIs to track in my business?
There are several questions you can ask yourself when determining which indicators to track;
- Who or what are these KPIs for? (A specific PART of your business like marketing or operations? A specific person in your business?)
- What 3 – 5 goals do you have for your business?
- Have you attached a specific number to your goal? (If not, it’s important to go back and attach numbers, to determine whether or not you’re making progress toward your goal).
- How much time do you want to give your team to reach these goals? (Is the goal monthly? Quarterly? Yearly?)
Once you’ve answered these questions it’s important to also be sure your whole team is aware of your KPIs (if they were not already part of the decision making).
Examples:
I know, sometimes it’s easier for me when I have examples in front of me, so here are some key performance indicators you may consider tweaking for your own business:
- 4 warm leads for a program per month.
- Decrease cost per lead by 2% by the end of Q3.
- Increase percentage of positive customer reviews by 10% compared to the previous year, by the end of the current year.
- Increase gross profit margin by 25% year over year.
Just remember; You don’t want to overdue it. 3-5 indicators is perfect for a small, online-business. Once those have been hit, you can add 3-5 new indicators.
What KPIs are you currently tracking in your business? I’d love to hear in the comment section.
Are you ready to set goals in your business but you feel like you’re still struggling a bit with how to do that? I’d love to chat! Schedule a free, no obligation chat with me today and let’s get you on your way to even more profitability!
