Key Performance Indicators (KPIs) are a quantifiable measure of performance for a specific goal in your business. They’re used to track your long-term progress against targets and are an incredibly important part of any business strategy.
KPIs provide a focal point for you and your team, giving you a clear indication of where you need to be headed. Of course, it can be hard to know exactly what you do and don’t need to track as a business owner, and it’s easy to become overwhelmed with all the available data.
How can I choose a KPI?
Before defining any KPIs, you should be clear about what you hope to achieve in your business. What is your long-term vision? Consider your overall goals and develop smart targets for each one. (Specific, Measurable, Attainable, Realistic, Time-bound)
· Think about how you will use KPI reporting – there’s no point in tracking data that you have no use for
· Consider clear targets
· Plan ahead – you will likely need to change up your KPIs as your business grows, so make sure they’re malleable
Once you have them outlined, it’s time to think about how you will use your KPIs to drive performance in your business. Your whole team should be on the same page, so make sure they are clearly communicated. Along with the SMART targets each one is tied to, your KPIs will give you specific things to work towards.
You should consider defining KPIs for various areas in your business, allowing you to develop a purposeful strategy that drives you in the right direction. For example – if you have a lead generation KPI, your marketing and conversion strategies will feed into it.
There are four different categories your KPIs might fall into:
Strategic – generally give a very high-level view of how your business is performing overall. Examples include total revenue and ROI.
Operational – measure operational progress over a short time-frame, such as monthly or weekly. They may be derived from strategic KPIs and tend to focus on employee performance. Examples include sales of specific products or personal output targets.
Functional – focused on a specific department or function, such as clicks in an email campaign or gross profit.
Leading / Lagging – Leading KPIs help predict outcomes, whereas Lagging KPIs track what has already happened.
Examples of KPIs
Of course, different businesses will have different goals and therefore, KPIs, but we can use some examples to develop those which are best for our strategies.
· Revenue per month
· Client retention
· Social media reach
· Conversion rate
· New leads
· Upsell rate
· Net promotor score
· Return on ad spend
· Response time
So here’s the million dollar question. Are you using KPIs in your business?