You may have heard about KPIs (Key Performance Indicators) during your working day but if not, this blog is perfect for you as we will cover the importance of having KPIs and how to set and measure them.
Whatever the size of a business and regardless of it being a Start-Up or a Growing Business, without KPIs in place a business will not succeed in the long run.
So, what are KPIs?
Key Performance Indicators, KPIs for short, are a set of metrics used to measure the success of your business or the success of specific business objectives that you set. They also help track progress towards their goals and make informed decisions.
KPIs will help you get a complete overview of where your business currently is and where it’s heading. They will also identify what improvements are needed to increase performance, keep it consistent and to allow your business to grow.
Why are KPIs important?
KPIs help provide a clear and concise understanding of the business by simplifying complex data and information into easily understandable metrics, which then provide a comprehensive view of the business’s performance and progress.
Here are our 3 reasons KPIs are important:
1. Helps you set realistic goals. By measuring KPIs, you can determine what your business needs to achieve to be able to obtain targets and that these targets are both realistic and achievable.
2. Improves decision making. KPIs provide actionable data and information that can be used to make smart business decisions.
3. Increases efficiency. By regularly measuring KPIs, you will be able to easily see what areas are failing and what needs to be done to improve their performance.
Types of KPIs
Here are some different types of KPIs, which business of all sizes can use.
1. Financial. These measure financial performance of the business, such as revenue, profit margins, return on investment and cash flow. These can be measured daily, weekly, monthly, or yearly, depending on what is suitable for your business.
2. Marketing. These measure the success of marketing activities and can include lead generation campaigns, traditional and digital advertising, website traffic, conversion rates of campaigns etc.
3. Customers. These measure the customers satisfaction and engagement and can include customer satisfaction score and retention rate.
4. Operational. These measure the efficiency and effectiveness of day-to-day operations, such as production time, process efficiency, and inventory & consumables turnover etc.
5. Employees. These measure the performance and engagement of employees, such as employee satisfaction score and employee turnover rate.
6. IT. These measure the performance and efficiency of the technology systems used throughout the business and can include equipment, hardware and software, system uptime, response time and data and cyber security.
It is very important to choose the appropriate KPIs for each area of a business, as well as reviewing and adjusting them regularly to make sure they are still the right ones for your business.
Setting and measuring KPIs
There isn’t a right or wrong amount of KPIs you should set, as long as they are the right KPIs for your business. Smaller sized businesses may only have half a dozen KPIs, whilst larger business may KPIs for each department.
Here are 4 of our important steps to follow when setting and measuring your KPIs:
1. Identify the right KPIs for your business. KPIs are not ‘One Size Fits All’ and completely varies for every business and industry. Start by identifying what is most important to your business and what will provide the most value. There is no reason to measure things that won’t have an impact to your business in the long run.
2. Set achievable and realistic targets. The KPIs you set must be realistic and achievable so that you can keep track of the progress and continuously make improvements.
3. Regularly monitor the progress. By doing this you can then make adjustments and changes to your business strategy as needed.
4. Review and adjust KPIs as needed. Review your KPIs frequently to make sure they are still relevant and effective for your business, then adjust them as needed.
Every business should have KPIs as are an essential tool for measuring the success of a business and making informed decisions. By setting and regularly monitoring the right KPIs, you can improve your business’s performance, reach goals more effectively and become a successful business.