Matching the right KPIs to your business strategy; keep it relevant!
If you have a good grip on what makes your business tick then it’s useful to be able to ‘glance’ at the business and its performance against plan by way of a brief set of business measures; Key performance Indicators (KPIs).
KPIs typically track the most important statistics about your business and its performance against plan. But beware the old adage ‘paralysis by analysis’. There is little point in measuring things that are not ‘key’; simply put, the ‘nice to knows’ are just that.
‘Key’ indicators are only those that you feel you can easily interrogate and then make the changes which will increase the firm’s productivity and will move your plan forward.
Metrics that will help you and not distract you
- Measures that will determine whether (or not) you’re on track to reach your financial goals.
- Measures that will evaluate the success of your strategy based on these key metrics.
- Measures that will pinpoint areas in your business that may need improvement.
- Measures that will critically Identify any opportunities and challenges.
- Measures that will reasonably assess whether your customers are happy or not
3 Recommended KPIs that will inform business strategy
- REVENUE GROWTH:
Sales Growth is perhaps number 1 on anyone’s business mind. Whilst not a panacea, it is a very good place to start. So how about your business:
- Track sales from one month to the next.
- Subtract the previous month’s revenue from the current month.
- Divide that number by the total of last month’s revenue.
You’ll arrive at the revenue growth (or decline) as a percentage with positive growth being the aim.
- INCOME SOURCES:
Study the Firm’s revenue streams:
- Revenue by client over time
- Revenue by service over time
This will help you determine profitable customers and segments.
- PROFITABILITY OVER TIME:
Keep a close eye on the firm’s expenses to see what’s sapping your financial resources.
By tracking your expenses and income you will be able to compile profit and loss reports.
This will help determine:
- Should you cut your costs?
- Should you review your expenses?
- Which costs should you cut?
- Should you increase your prices?
- Should you look for more clients of a more profitable nature?