As a business owner, it’s easy to get caught up in the day-to-day operations of your organisation and miss out on the bigger picture. You might rely on your gut feeling to determine how well your business is doing but is that the right way to measure performance and approach strategically important business decisions. It can be difficult to understand and measure your business's performance or identify areas for improvement without measuring specific important results. This is where Key Performance Indicators (KPIs) are really important and useful.

What are KPIs? They are simply measurable pre-determined values that demonstrate if a business is achieving its potential. Using KPIs offer insights into your business performance that help you stay competitive and make better decisions. They can also help you achieve things like business growth and show investment potential.

Running a business can often be very challenging, dealing with customers, managing finances, achieving targets and solving problems. KPIs help bring understanding and a clearer vision of where you are by giving you a simple way to measure how well you are doing. For example, if one of your goals is to increase output, tracking a KPI like weekly production levels and increases allows you to quantify that the things that you are doing are working. Or if staff retention is a priority, measuring the monthly staff turnover provides a clear picture of whether people are leaving at an unacceptable rate or not. By tracking the right KPIs, you can see how close you are to achieving your goals and this allows you to correct any strategy or actions you are already taking

Many business owners falsely rely on their sixth sense when it comes to making decisions. By using KPIs you are using a much better fully informed process that should give better results. By monitoring and measuring your performance against KPIs, you are using actual facts and figures giving you a more accurate understanding of your business's performance and improving the quality of your decision making.

For instance, if your sales enquiries are increasing but your customer conversion rate is dropping, this would demonstrate you have a problem with your sales team’s ability to turn enquiries into sales and one way to address that could be with some sales closing training.  Instead of waiting for problems to show themselves in your profitability or growth, KPIs can give you the information you need to make informed decisions and take immediate action before things get too bad and costly.

It can be difficult to ensure that everyone in your business is working toward the same objectives, especially if you are going through major growth and having to employ new staff. KPIs can help keep everybody moving in the same direction. When you establish KPIs for different team members or different departments, you’re allowing individuals to prioritise what they do day to day, and this allows you to determine what they focus on without it appearing obvious. For example, if your telesales team knows they’re being measured on weekly calls made, they’ll focus on maximising the number of calls made but if you add a further target such as calls that result in an order then you are introducing KPIs that not only motivate employees by giving them clear targets to aim for, they also provide accountability, making sure that their efforts will contribute towards your business goals.

KPIs are not just about measuring current success, they can also help you to identify future opportunities where improvements can be made. Tracking KPIs, reviewing and comparing them regularly, helps you spot business inefficiency and encourages improvement, so your business becomes more efficient over time.

Every part of your business should be pulling you in the same direction. KPIs help to make sure that your daily operations are contributing to your strategic goals. For example, if your goal is to increase profitability, you might track KPIs like ‘gross profit margin’ or ‘operating costs as a percentage of sales revenue’ to ensure you’re making financial decisions that support these objectives.

Starting to introduce KPIs doesn’t have to be time consuming, difficult or complex. Here’s our simple five stage guide on how to get started:

• Specify your business goals: Start by identifying what are the key objectives for your business. What do you want your business to achieve? This could cover anything such as increasing productivity, reducing costs, growing sales.
• Discover Industry or Sector KPIs: Find out if there are any standard performance KPIs for your industry on things like production rates and costs, labour turnover and sales. Use these to measure how you stand, compared to your competitors and your industry sector.
• Choose the appropriate KPIs: Pick KPIs that compare directly with your goals. For example, if growth is your aim, KPIs like ‘new customer acquisition’, or ‘enquiry to order conversion rates’ may be relevant.
• Make KPIs measurable and realistic: KPIs should be clear and achievable. So set targets that challenge your business but are still realistic and have some sort of target measurement. For example, ‘increase sales by 5% over the next three months’ is better than a generic ‘grow sales this year.’
• Review KPIs regularly: KPIs are only valuable if you monitor them accurately, closely and regularly. Set up regular reporting (weekly or monthly) and review your performance against each KPI, perhaps by having a meeting with key employees who have a direct influence over KPI performance. This ensures you are measuring your progress and can make any adjustments that are needed.

KPIs might be perceived as only being useful for bigger businesses, but they’re invaluable for businesses of any size. By implementing KPIs, you gain a better insight into your performance and make sure your business is moving in the direction you want it to. Whether you’re looking to grow, improve efficiency or increase profitability, KPIs help you to run a successful business. Like many initiatives start small, track what is important and matters to you, and watch and develop as your performance gets better.

If you’re not sure where to start, get in touch with us. We have the experience and expertise to help you establish a set of KPIs that are specific to you and will help you meet your objectives.

If you do need help with developing your KPIs, call us on 01482 772261 or email info@kaizengroup.uk. We will be very happy to help you with any query you may have or come and see you for a no cost initial consultation.

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