As a business owner, you have needed to learn a lot of jargon. One of the key terms you should be aware of by now is KPIs. If you aren’t really sure what a KPI is, it is a key performance indicator of how your business is doing. You really need to pay attention to certain KPIs in your business, so you know whether your business is performing well.
Choosing the Best KPIs for Your Business
Many business owners ask us how they should choose the best KPIs for their business. The answer to that is fairly simple. You should choose the KPIs that show you if you are in alignment with your goals and if your business is growing appropriately.
The best KPIs are easy to measure, accessible, and focus on actionable steps that can be used to reach your goals.
A couple of questions you should ask yourself when determining if a KPI is worth following for your business include:
- What are the goals of my business?
- How can I make that goal measurable?
- What top metrics really matter?
- What are my leading and lagging indicators?
- What trends can I leverage?
The KPIs Your Business Will Benefit from Following
We understand that you don’t really have the time to think about KPIs right now. At least when it comes to which ones your business can benefit from following. Therefore, we have determined the best KPIs your business will benefit from.
We recommend beginning with these KPIs in your business and then adding others as you see fit.
Cash Flow Forecast
One of the best KPIs for any business to follow is cash flow forecast. This KPI allows you to see whether your sales and margins are appropriate. Looking at this KPI is also an excellent way to determine if your business has any problems that need to be fixed. Finding problems early can save a lot of headaches in the future.
Cash flow forecasts can also help you with loan applications and tax planning.
Revenue vs Target
As a business owner, you probably already have a target revenue number in mind for the month, quarter, and year. The Revenue vs Target KPI compares your actual revenue with your projected, or targeted, revenue. Choosing to follow this KPI will show you how close you are to achieving your target revenue number.
Expenses vs Budget
Every business should have a budget in place for what it is spending on expenses. And yet, not many businesses pay attention to their expenses and go way over budget each month. If you haven’t checked in on your business’s spending habits lately, it may be a good time to run an Expenses vs Budget KPI.
This KPI for your business can help you understand why your expenses are much higher than your allowed budget. When you see the numbers in black and white, you can easily determine whether you need a new budget or if you can cut back in some areas.
Customer/Client Satisfaction and Retention
Your number one goal is to keep your customers, or clients, happy, so they come back again and again. If you haven’t been tracking how many customers, or clients, are returning and how many are not, you are losing out on key information in your business.
We recommend starting to run a Customer/Client Satisfaction and Retention KPI for your business. There are multiple performance indicators you can use for this KPI. We recommend using the indicators that make the most sense for your business.
Employee Turnover Rate
You might not be aware, but a high employee turnover rate can really affect how a business operates. One of the best KPIs you can follow for your business is the Employee Turnover Rate. Keeping an eye on this KPI will allow you to see whether or not you have an excellent workplace environment for your business. If this number is continuously high, you may need to determine why people are leaving and then find a solution.
The all-time best KPI for any business is Profits. Your profits are one of the best key performance indicators available. We recommend analyzing both your gross profits and your net profit margin to get a better understanding how successful your business is with generating returns.
Do you currently follow these KPIs in your business? Do you need help generating these KPIs?
Contact our office today if you need help understanding the KPIs you should be following for your business. We can help you find the best ones for your needs, while also making sure your books are up to date and accurate.