KPIs are everywhere in businesses. When measuring your business’s success, there are many KPIs to consider. The most common ones include sales volume, profit margin, and customer satisfaction. But these metrics don’t tell the whole story. For example, you might be making a lot of money but not retaining customers or hiring the right people; or perhaps you have more customers than ever before, but they’re all coming through the door because of price rather than brand value. That’s why I’ve put together this list (with input from my own data science team) of 10 key performance indicators that measure different aspects of your business in ways that truly matter:
Start by defining success.
Before developing key performance indicators, you need to define what success looks like for your business. This cannot be easy because many people have different ideas about what is essential.
It’s vital that everyone involved in setting KPIs has a shared understanding of their purpose and how they will be used–otherwise, they will work differently than intended.
To get started with this process:
- Write down what success means for your company or department (e.g., “grow revenue by 20%”).
- Consider whether any factors besides money matter to the people working at your company (e.g., “employees feel valued”).
- Think about where KPIs might come into play if things go wrong–will they help fix problems?
Choose KPIs that are relevant to your business.
When choosing KPIs, it’s important to remember that not all metrics are created equal. Some KPIs may be more relevant than others, depending on the type of business you’re in and its goals. For example, if your company sells products that require a lot of customer service or technical support after purchase (like software), then measuring things like customer satisfaction and call centre performance might be more important than sales volume alone–even though these numbers might seem more straightforward at first glance!
Don’t pick because they’re famous or easy to measure/report on.
As we mentioned in this guide: don’t let fads dictate your choices! Some companies adopt famous metrics simply because they’ve heard about them elsewhere without really understanding why those measures work well for those particular organisations’ needs–and why they wouldn’t work so well for yours (or perhaps even cause harm). Also, keep in mind that if something seems simple enough on paper but would require a lot of extra effort from employees who aren’t familiar with this kind of data collection/analysis process yet…then maybe reconsider whether or not it should become part of your routine instead?
Focus on what you can control.
- Focus on what you can control.
- Don’t focus on things that are out of your control.
- Don’t focus on things you can’t control and don’t have any influence over, like the weather or interest rates, unless they’re going to directly impact your KPIs (like if a storm knocks out power for several days).
Don’t focus on volume; focus on value.
It’s easy to get caught up in the volume of your efforts, but it’s more important to focus on value. Your KPIs should be aligned with your business goals and strategy for decision-making.
Focusing on cost per sale will be more effective than growing overall sales numbers if you’re trying to increase sales volume or revenue. For example, if it costs $10 per transaction but generates an additional $20 worth of profit for each customer who makes another purchase within six months, that seems like a good idea!
Similarly, if you’re trying to improve customer experience by reducing wait times at restaurants or improving staff training programs without increasing costs significantly–then maybe those are better ways of measuring success than simply tracking how many people walked through the door during peak hours (which would include many people who weren’t served).
Consider both top-line revenue and bottom-line profits.
It would help if, when developing your KPIs, you should consider reconsidering revenue profits when-line revenue is the total amount of money you bring in. In contrast, bottom-line profit is the total amount of money you keep after all expenses are paid. Bottom-line profit is called EBITDA (earnings before interest, taxes, depreciation and amortisation).
- Top-line revenue: Your annual sales value
- Bottom-line profit: Your annual net income.
Create meaningful reports.
- Use graphs, charts and tables to make the data easier to understand.
- Use colours and symbols to highlight important information.
- Use a consistent format for all reports so readers can easily compare different types of information from one account to another.
- Please choose a colour scheme for your KPIs that is easy on the eyes and makes it easy for people who don’t have time or resources available to learn how to interpret data from multiple sources (such as when creating dashboards).
Here’s how to pick the right KPIs and measures of success for your business.
- Start by defining success. You can’t measure what you don’t know, so you must clarify your definition of success and how you want to measure it. For example, if you want customers to buy more often or spend more on each visit, that’s the metric that should be part of your KPIs.
- Choose relevant KPIs and measures of success for your business. You may have several goals or objectives–for example, increasing revenue or reducing costs–so select one primary KPI (key performance indicator) that aligns with those objectives, and all other metrics will fall into place around it.
- Focus on what matters most: volume versus value.
- Volume refers to the number of transactions made by customers during a specific period; value refers to how much money was spent by each customer during those transactions.
- Revenue generated from an individual transaction might seem insignificant compared with lifetime value (LTV). However, if many people use your service regularly every month, this could still add up quickly over time! If someone buys something at a total price but continues using our service every day after paying us once, then we’ve hit our goal even though our profit per item sold wasn’t very high because these repeat customers provide us with long-term stability, which helps offset any losses incurred during initial setup costs.”
Bottom Line
Our advice is to start by defining success. Then, choose relevant KPIs for your business and focus on what you can control. Don’t focus on volume; focus on value! Finally, create meaningful reports that will help you make better decisions in the future.
Who am I?
I am Dotun Adeoye, a Business Growth Strategist & Author of the 5 Pillars of Business Growth.
I’ve built up my experience via serial entrepreneurship, consulting leadership roles in business growth, business development and product innovation in large companies worldwide in the last 30 years.
Today, I consult with large businesses on how to sustainably grow their businesses, sustain infinite growth, and ensure business continuity irrespective of the business climate.
Hire Dotun Adeoye to Speak Virtually or In – Person at your company’s event to cover this or other topics. You can also get in touch via +44 203 097 1718 or dotun at dotunadeoye.com.
