What are KPI’s and why do you need them?
All business owners need Key Performance Indicators (KPI’s) to understand the performance and health of the business. KPI’s help you to evaluate your operation and ensure it is running at its most optimum level. Tracking your progress using your KPI’s will help you to identify areas of your business processes affecting your performance. While Financial KPI’s are an excellent place to start, there are several other metrics that help you track your growth and progress. Understanding your customers, your marketing efforts and your operational performance are just a few other important areas.
In this article, we will introduce a few KPIs, see why they are essential and how BlindMatrix can help you track these metrics.
Key Performance Indicators, better known as KPIs, are performance measurement tools that enable entrepreneurs to gain better insight into the workings of their business. By tracking the right KPIs businesses can improve their decision-making, set more strategic goals and review their business operations in real-time. KPIs, unlike bare financial metrics, help companies see how they are performing and if they are reaching their goals and objectives. KPI’s serve as navigational guides that help businesses chart their course for success.
Choosing the right KPIs
Since KPIs are vital metrics that help the higher management track the progress of a business, you must choose the right metrics. Many companies use Lean and Six Sigma methodologies to help them identify the right KPI’s and to improve their business performance. Business owners must use the KPIs that are most aligned with their business goals to ensure that whatever they are tracking is accurate and relevant to their business. To enable this, your business goals and objectives need to be actionable and measurable, while also including a time frame as a reference. Therefore, rather than having vague guidelines, such as “Be the best in the business!”, your goals should be more specific. Hence, a goal such as “Make 10 million in gross revenue by Q1 of 2021” is much more actionable and measurable, making it easier to find the appropriate KPIs.
In most cases, you will have to introduce new KPIs depending on your personal business goals. However, all KPIs have specific characteristics in common to be efficient and effective. Here are the criteria you need to consider before choosing or deciding on a KPI.
Objective – show improvements that need to be made
Easy to calculate and interpret
Quantifiable and well-defined
Timely and relevant
- Net Profit Margin – Net Profit Margin measures how effective your business is at generating profit on each pound/dollar of revenue you bring in.
- Gross Profit Margin – Gross Profit Margin measures how much of each pound/dollar in sales is left as profit after accounting for the cost of goods sold.
- Operating Profit Margin – Operating Profit Margin (often shortened to just Operating Margin) provides an indicator of the operating efficiency and / or pricing strategy of a business.
- Promoter Score (NPS) – Net Promoter Score (NPS) is loyalty metric used to measure the number of satisfied customers and the average degree of satisfaction.
- Customer Retention Rate – Customer Retention Rate is one of the most important KPIs because it impacts (1) recurring revenue, (2) customer satisfaction levels and (3) the growth of the business.
- Customer Profitability Score – Customer Profitability Score (CPS) is a metric that looks the value a customer adds to your business relative to the cost of serving that customer. Customers who make positive contributions to your company’s profit have a high CPS.
- Cost per Lead – Cost per lead metric measures how cost-effective your marketing campaigns are when it comes to generating new leads for your sales team.
- Conversion Rate – Conversion Rate measures the effectiveness of your sales team at converting leads into new customers.
- Order Fulfilment Cycle Time – Order Fulfillment Cycle Time measures the time it takes from customer order to the receipt of the product or service by the customers.
- Order On Time In Full – On Time in Full (OTIF) Delivery measures how well the business was able to deliver the full quantity requested by the customer by the requested date.
All Blinds businesses need to use Key Performance Indicators to measure their performance and make sure they are on the right path. Our technology-driven solutions help you gain a more in-depth insight into your business operations. As a result, you will have an easier time measuring these KPIs and understanding the true nature and potential of your business.
Our Dashboards and Business Reports can help you to analyse and improve your businesses performance.