In today's world, managing and monitoring your business performance is much easier with the right tools and methodologies. The advancement in technology has allowed business owners and managers to analyse and monitor metrics of business success. Over the last few years, hundreds or maybe thousands of applications and online programs have been developed for business monitoring alone providing more efficiency analysing data for business operations improvement.
To leverage business growth, business owners and managers must know their business' strengths and weaknesses and understand their customers' needs and wants.
How is this possible?
What are the key performance indicators (KPIs) that businesses need to measure to determine the future risks and areas for improvement in their businesses? Below are some of the key metrics to consider:
1. Sales/ Revenue KPIs – One of the most important metrics to analyse and monitor is your sales or revenue. Determine if your business is generating revenue by using Sales KPIs such as sales growth, quote to lose ratio, average purchase value and sales by contact/ channel method.
2. Marketing KPIs – To be effective marketing efforts should be refined by constant trial and error and analysis of data from marketing campaigns. Marketing KPIs should be segmented depending on the marketing channel or source used.
One example of a marketing KPI is CAC or Customer Acquisition Cost – This refers to the cost of acquiring users or clients stated by per new user or client. To get the estimated cost per customer, it is important to separate acquired clients from organic traffic and clients acquired from paid marketing. If a business uses referral programs this should be considered to the costing as well.
Other important marketing KPIs include marketing return on investment (ROI), incremental sales, goal completion rate, web traffic sources, keyword performance, conversion rate, social sentiment and end action rate.
3. Financial KPIs – The key way to improve a business' profitability and fiscal health is through tracking financial KPIs and ratios. Businesses must analyse and understand how the business is performing financially. The most commonly used financial metrics are quick ratio, working capital, profit and loss, net and gross profit margin, accounts receivable and payable, overhead costs, and hours worked per process.
4. Customer Service / Help Desk KPIs – These departments of a business are at the frontline where the initial interaction of business and customers generally happens. Monitoring customer service and help desk KPIs is just as important as the other metrics to ensure that clients' expectations are met. Some of the metrics used include average handling time, first call resolution, cost per contact and retention.
5. Productivity – Measuring staff performance and productivity also plays a vital role in business growth. An in-depth understanding on how your staff are performing can greatly help the success of your business. With this, you can identify the roadblocks that your employees typically encounter and provide solutions before the roadblocks jeopardise your business' operations. Moreover, high productivity and efficiency can be your number one asset to achieve all your target KPIs.
Managing KPIs can open many opportunities for your business. By using this measurable data, you can identify the issues that may be causing your sales to decline or understand effective marketing channels that your business may have overlooked. Just like when you are using a magnifying glass, you are able to see things closer including the tiniest details. You can make business decisions based on data analysis to refine and improve your business strategies instead of merely relying on your knowledge.
Whilst having all these KPIs to measure your business performance is significant to leveraging your business growth, you must also understand when to draw the line. Sometimes keeping an eye on one of your metrics such as production ratios may lead to impossible targets or goals that may harm your employee's morale and overall business performance. KPIs must be used to improve and grow your business and not the other way around. Do not fall into the trap of managing by the metrics.
Let us know if you have questions regarding KPIs or if you want to implement an interesting metric to monitor your business performance. Call us on (09) 576 4166 or request an appointment online.