Does Your South Florida Business Have Key Performance Indicators?
Too often, business owners fail to understand their business operations. This is because they fail to use any metrics to assess how well the business is performing throughout the year. Such business owners are usually left stuck with a business with stagnated growth, if any.
That said, every business needs to set clear goals and determine the ideal way of tracking these goals. Looking at metrics like profit and revenue on the balance sheet only paints a brief picture of your business. For a business to prosper, tangible key performance indicators (KPIs) should be used to gauge progress.
What Are KPIs?
KPIs are specific and measurable metrics that have a proven impact on one’s business or business department. KPIs allow a business to keep an ongoing pulse of its most important aspects and make corrections quickly whenever there’s a need to do so.
An easy way to understand KPIs is to think of them as a speedometer, the gauge in your car, or even the GPS. How can one gauge how far their car can still go if they don’t look at the speedometer? By the same logic, one can only see how well their business is performing by reviewing KPIs.
A business may have as many as 40+ indicators to determine how well it is performing. Given the sheer numbers of these indicators, they can overwhelm you and distract you from the real issue. Aligning KPIs into one dashboard with 6-10 indicators enables leaders to focus on what matters most – improving the efficiency and productivity of the business. When KPIs are aligned into a single dashboard, it is easier to react and pivot accordingly should a KPI begin to fail.
Why Should Businesses Use KPIs?
Here are some of the reasons why every business should have KPIs:
1. To Monitor Business Health
KPIs serve as a scorecard for your business’s health. You only need a couple of KPIs to keep an eye on your business’s vital signs. You should only track what you want to move so that you can channel more efforts where you want to impact change. Choose the right KPIs for your business, then determine the people who are accountable for them.
2. To Measure Progress
KPIs enable you to track key results indicators such as gross margin or revenue generation of employees, departments, etc. Ensure that you set your target at the beginning of each year and quarter and use the KPIs weekly to measure your progress towards those goals. By setting the right KPIs, you’ll be able to track your progress towards attaining long-term goals.
3. To Tackle Opportunities and Solve Problems
You can leverage a combination of different KPIs on the dashboard to obtain the right information for solving various business problems and attacking opportunities. For instance, if you’re experiencing a slump in sales, you can identify a few KPIs that can help you turn the tides – they could include appointments kept, outbound calls, number of trade shows attended, etc.
Put these KPIs on a dashboard and track them weekly to determine if you’ve found the right lever, which helps you generate predictable sales. Or say you have an excellent idea for a new product; you can test it out with a few customers and use KPIs to check if your business model is valid before launching the product on a larger scale.
4. To Make Adjustments
Leading indicator KPIs can help you predict future occurrences and future results. These performance indicators allow you to determine whether you’re on track to attain your desired results. Leading indicators have two attributes: you can influence them directly, plus they are measurable. They are excellent KPIs to have on your dashboard to help keep your projects on track.
5. To Analyze Patterns Over Time
Suppose you measure the same KPIs on a quarterly basis, you can start to detect patterns in your figures. There are numerous ways these patterns can benefit your business. For instance, they can help you predict when your slowest quarter will be – you can use the time for system updates or business-wide training initiatives.
KPIs Best Practices
Here are some of the best practices you should heed when formulating KPIs for your business:
1. Keep Them Specific, But Simple
By selecting KPIs that are tailored to each department in your organization, your teams can focus on the core tasks that matter in attaining your business goals. Avoid choosing flashy KPIs and imposing them on your team members. Ideally, you should start with KPIs that are easy to track.
KPIs are unique to every business and across industries. As such, just because a specific KPI works for a specific industry doesn’t necessarily mean that it will work for another.
2. Focus on Your Business’s Goals
Before you start thinking about selecting KPIs, you should first start by setting realistic business goals. When your goals are realistic, you’ll be able to create accurate expectations for your project growth and team performance forecasts on all metrics.
3. Company Size
Your KPIs should be dependent on the size of your business. For instance, smaller businesses may focus on values that are key to the business and track short-term progress. On the other hand, established businesses may focus on cost acquisitions, customer lifetime values, and big picture growth.
4. Management Use
Tracking KPIs across different departments in an organization enables decision-makers to measure accurate real-time performance and strategize effectively.
KPIs are unique across departments, businesses, and industries. Whereas your business may have several departments that make up your organizational objectives, measurable KPIs should be delegated per department. For instance, marketing teams should have different KPIs from the sales teams, given that they have different goals.
Also, every department should have 4-5 numbers that they can track, monitor, and put forth plans to improve. The individual department numbers should support an additional 3-4 numbers of the company as a whole in working towards attaining the overall objectives.
The bottom line is, the more you know about where you are, the better informed you will be to make the right decisions about how you want to get where you want to be in the shortest time possible. We always say, “what gets tracked, gets done,” and if something isn’t being tracked, then it should be a priority or worked on.
Reach Out to 4it for Project Management Services
Are you looking to introduce new technology in your South Florida business? 4it can help. Given the quickening pace of change in information technology, it has never been more important to understand how to make these transformations succeed while minimizing risks. 4it’s project management services can help you evaluate, plan, deploy, set goals and KPIs, and review your project. Contact us today to learn more about how we can help you.