What Are KPI’s?
By Michael LeJeune
KPI’s are Key Performance Indicators. It’s really a fancy name for metrics, business scorecard, or business dashboard. KPI’s are one of the most overlooked and under appreciated aspects of learning to run a successful business.
Here’s the blunt truth about KPI’s. You need to measure the activities going on in your business and KPI’s are the way to do it. Imagine for a moment going to a baseball game where they didn’t keep score.
There wouldn’t be much of a point to playing the game if you didn’t know who was winning, who was losing, or what the outcome was going to be. The same applies to business.
Imagine for a moment a business where you never count the money in the register, you never ask how sales are doing, and you never look at your marketing results. The sad answer is that this is the case for many business owners and it’s one of the many reasons that we have a 95% failure rate for new businesses.
So what’s the solution?
Simply put, measure everything you can. I know that’s not a great place to start so here’s a list of 3 key areas of your business and some sample KPI’s that you can start using right away to measure the effectiveness of your efforts.
Key Area #1: Sales – Measure how many customers you speak to each day, how many buy something, on average how much they spend with each sale.
Key Area #2: Marketing – Measure where each lead is coming from, how many leads you get each month, how much each lead is costing you, which leads make you the most money, which leads are losing you money, which leads produce ideal clients, and which leads waste your time.
Key Area #3: Website – Measure how many visits you get per month (Tip: Use Google Analytics – it’s free), how many subscribers to your coupons/offers, how many calls the website generates, traffic sources, and sales your website generates.
These three key areas are a great start to implementing KPI’s. Once you have implemented these, I suggest looking at customer service, customer retention, support, delivery, and production KPI’s. You can literally come up with 3 to 5 KPI’s for each and every area of the business regardless of whether it produces revenue or not.
Insider Tip: The one thing you want to get from a KPI is actionable information. So when you are thinking about what KPI’s to implement and track in your business ask yourself this: “What information would help me make better decisions about the way I run my company”? Answer that question and the KPI will mean more to you.
One last thing, most people ask me how often they should measure KPI’s. Each business is different, but in general I prefer weekly monitoring.
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