In business, we always talk about the importance of goal setting and the essentialness of having goals. Having set goals are extremely important in having a successful venture, however, so is having a true understanding of how your business operates. Most business owners see failure early on because they do not have any metrics of their operations throughout the year. Metrics are needed to help you understand the health of your business, these metrics are called KPIs. KPIs which are short for key performance indicators are the rulers in measuring your business success and failure. In the beginning, companies may have simple ways of measuring success such as making $200,000 per quarter or selling 1000 units per month. As you and your business evolve so will your KPIs. The way you measure your KPIs may also become more sophisticated, for example, you may measure your ROI on products, turnover rate, or employee performance. As KPIs can be useful, they can be as useless if you do not separate the essential from the non-essential. With that said, here are a few ways to make sure you are getting everything you need out of the KPIs you choose.
Choose KPIs that look forward, not back
The digital dashboard in your car tells you how fast you were going a second ago, however, it won’t tell you the speed you’ll be going in the next few minutes. The concept is identical with KPIs, they let you know how the business performed and not how it will perform next month. Information from a past performance can be useful, especially in creating future projections. By reviewing the metrics of your company you are able to identify the leading indicators of your operation’s performance.
Software is constantly evolving, resulting in the enhancement of our ability to predict the future. Today it is a reality to predict almost to the second when your products will sell out, especially with the right indicators.
Don’t measure things that are irrelevant or beyond your control
It is vital that companies focus on KPIs that are relevant and in their control. For example, speed is an indicator of how fast we are moving, if we’re moving too fast we can slow down, or if we’re moving to slow we can speed up. Another indicator is the gas in our vehicles and the gauge telling us that it is time to fill up. Why should we care about the temperature outside? The climate may indeed affect the way you drive however you can not change it. Much as we wish we can flip a switch to bring out the sun, it just does not exist. It is very counterproductive to monitor the wrong performance indicators and frustrating to your staff. At times metrics exceed the capacity of your employees to reach. The metrics should be designed for you to move the needle forward.
Avoid vanity metrics
Dopamine, the very thing responsible for the joy we feel when we get new followers or an abundance of likes on social media. As good as it feels, it is just as harmful. The amount of Facebook and Instagram followers you have are useless metrics. There are far more valuable things to measure such as the insights on your page and the website clicks that translate to new leads. Those are metrics that can be improved and create more conversions. Sure having a lot of followers validates that you are known, however, a wise person once said: “notoriety does not pay the bills”.
Tell a story
Lastly, use your data to tell a compelling story. Business owners often let numbers be the sole metric in performance. Numbers are truthful, however, they do not always guarantee results. Let’s say we run two ads for the data and statistics in Flint, Michigan, and a story about a family in Flint. The ad about the story of the family in Flint, Michigan would trump the statistics ad. Human stories are always a good read in comparison to reading raw data.
The right KPIs can be a powerful tool in measuring your companies performance as well as identifying what is working and what’s not.
Take a second and look at your current business or venture and identify what kinds of key metrics you would need to measure that would contribute to pushing the needle forward.
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