Key Performance Indicators: The Gateway To Knowing Your Business’ Health
So What is a KPI?
KPI stands for Key Performance Indicator. All of us who have attended school received report cards on a regular basis. The scales were usually A through F or 4.0 through 0.0, or some variation. These grades were your KPI’s while you were in school. They reported to you the categories you were performing well in; and the categories that you were not performing well in – math, reading, writing, verbal skills, chemistry, etc. As a result, they helped you to focus on the categories where you needed to devote more effort to perform at a higher level – or in other words – to achieve your goals.
In business, KPI’s provide the same benefits as they did in school. They help the business owner and his team focus on the areas that are most critical to achieving their goals by measuring performance in a tangible way – by using a predetermined metrics.
Tracking Key Performance Indicators will allow you to quickly:
- Measure your progress toward your goals
- Identify in what areas you and your team need to improve
- Focus on what matters most so that you maximize your productivity
So What Should Your KPIs Be?
Key Performance Indicators are a predetermined set of metrics issued at specific intervals of time that you and your team will use to measure your performance/progress toward achieving your goals. So, the goals that you set, will determine the KPI’s required to measure your progress. The shorter the time interval, the more the KPI will affect the behaviors and activities of you and your team in real time
Here’s an example of how to set KPI’s – it all starts with your Goal:
Goal: Achieve annual revenue of $5 million
Here are a few suggested KPI’s for this goal (there certainly can be more!):
Monthly Revenue $416,667
Monthly Leads 320
Monthly Proposals 160
Monthly Prop. Conversion Rate 65%
Average Dollar Sale $4,000
You simply cannot manage what you don’t measure—period. Without knowing your business’s KPIs, you are flying blind. Different businesses may require more or less emphasis on various KPIs – so, identifying and setting your KPIs begins with your goals.
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