How to Measure KPIs in Your Small Business
According to one study, 20% of new businesses will fail within the first year that they open.
If you want to make sure that you’re not one of those businesses, you’ll need to learn how to measure KPIs to ensure that you’re growing effectively.
Thankfully, we have all the information you need to track these key performance indicators, so keep reading to find out what business metrics you should really be tracking!
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Types of KPIs
There are also a few KPIs that you should consider when trying to figure out which ones are important to track. You should track more than one so that you have a balanced perspective on how well your balance is doing.
Some of the important types of KPIs you should have include financial perspectives, a customer perspective, a process perspective, and a growth perspective.
The customer perspective will focus on how your company works with customers. It may also involve surveying your existing customers to see how satisfied they are with your business.
From a financial perspective, you should examine the liquidity, financial efficiency, and risks in your business. One key point to look at would be the day sales outstanding compared to your current ratio.
From the growth perspective, you’ll need to measure things like investment equipment, doing research on opportunities, and return on customer acquisition costs.
Lastly, from the process perspective, you can look at specific processes in your company to see if they’re running efficiently. This might be looking at billable hours for a professional service company or analyzing the units your manufacturing can produce in an hour.
When you measure diversity, you’ll be measuring whether or not your company is a good company to work for. This might be considered a process perspective, but it could also fall into a human resource perspective.
When you have a good work culture, you’re more likely to keep employees around, but you can also attract the best talent to your business.
Some studies have shown that having a higher rate of inclusion or diversity has been great for helping companies weather difficult times in the economy, like in a financial recession.
So this is one KPI that you should make sure you start investing in. To make sure that you do have a strong company culture, you might want to send out anonymous surveys to your employees.
Even if you do have a good company culture and diversity now, there might be some areas where there are a few gaps that need to be filled.
You should work with your human resources department and track your diversity and inclusion survey over time.
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The sales lift KPI is focused on making more sales to bring in more revenue for your company. These sales can either come from your in-store sale or your eCommerce.
For measuring sales from eCommerce, it’s actually fairly easy to track all your purchase data. There are many software applications that can manage your point of sale system and then export a report of how much money came in. You can also visit Tekmetric.com for help with tracking other aspects as well.
However, if you have a brick-and-mortar store, this might be a little more difficult to measure. To do this, you can use first-party data to help connect the in-store transactions back to any digital advertising campaigns.
You may also want to let people use coupons or order ahead of time for the store so that you can see which advertisements are actually working.
Once you can match your data up and link it to an advertisement, you’ll be able to guess how much sales were made because of your strategy.
If you’re going to measure business metrics, you have to measure revenue. This is one of the highest long-term metrics.
Your goal should be to bring in more revenue. If you’re running an eCommerce company, then you can track that whenever a purchase is made.
Advertisers will also be able to easily track that data too. Some of them can even track the data when there is an offline sale. But there is a gap between the online and offline sales, so they may need to extrapolate their data and estimate what the revenue would be.
However, even once it’s extrapolated, you’ll only have a rough idea of if the campaigns are hitting your bottom line or not.
Return on Investment
The return on investment metric won’t take into account your costs other than your advertisement spending. That’s why it’s important to look at your profits and your return on investment.
However, when you measure this business metric, you’ll be checking to see if your marketing strategies are driving the value of your company up even when you spend all of the money on the investment.
You may also want to consider the future value of your customers too. This can help give you a better, more accurate picture of how well your company is really doing.
Learn More About How to Measure KPIs
These are only a few things to know about how to measure KPIs, but there are many more things that you should keep in mind.
We know that running a business can be difficult at times, but you don’t have to figure it out on your own. We’re here to help you out.
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