Small businesses, just like mega-corporations, need to keep a pulse on whether they’re on the trajectory toward meeting their goals. Key performance indicators (KPIs) are tools that can enable them to do that.
What are Key Performance Indicators?
KPIs are measurable values that demonstrate how effectively business activities are helping a company achieve its objectives. By measuring defined criteria, they help gauge performance. One company’s KPIs may vary significantly from another’s depending on their industry, size, where they are in their business life-cycle, their location, what they want to accomplish, and other factors.
How Can KPIs Help Your Small Business?
KPIs provide a clearly defined way of assessing the progress a business is making toward its strategic or operational goals. KPIs link to target values that determine whether an activity or area of operation is or is not meeting expectations. When reviewed on a monthly, quarterly, or semi-annual basis, KPI results can help a company identify areas of weakness and enable it to make adjustments before those shortcomings result in missing critical business objectives.
Examples of KPIs
Some examples of KPIs that a business might use to monitor its effectiveness include:
Marketing KPIs like those below can shed light on how effectively and cost-efficiently a business’s marketing and advertising efforts are contributing to reaching company goals.
- Number of unique website visitors
- Number of guest posts published on industry blogs
- Cost of new customer acquisition
- Number of new email subscribers
- Number of whitepaper downloads
A business might use various KPIs to help determine if sales efforts are meeting expectations for prospecting, closing, and upselling.
- Number of new leads
- Number of new customers
- Monthly revenue per customer
KPIs related to products can help a business monitor potential gaps in meeting target market needs, quality issues, and production inefficiencies.
- Cost per unit
- Number of customer issues or complaints
- Number of product returns
Financial KPIs can help a company track if it is growing its revenue at an acceptable rate. They can also help determine if product/service pricing and expenses are in line.
- Revenue growth rate
- Gross profit margin
- Net profit margin
- Cash flow
Customer Service KPIs
KPIs that measure customer service activities can help reveal how well and how efficiently a company is serving its customers.
- Average time per customer call
- Number of repeat customer calls
- Customer retention rate
- Customer satisfaction rating (perhaps through an online customer survey)
The list above isn’t exact nor exhaustive; a business might track different or additional KPIs based on its unique situation.
Tips for Establishing KPIs
Before a business can decide on its KPIs, it must first have clear goals—for instance, “for 2018, increase service revenue by 4 percent over 2017” or “increase net profit by $100,000 this year.”
KPIs must be:
- Relevant to the business goals
- Specific (have a target value)
- Achievable (not outside of the realm of possibility)
Fortunately, if you aren’t familiar with goal-setting or working with key performance indicators, you don’t have to go it alone. Our SCORE mentors have experience in all aspects running a small business, and they are here to help by providing guidance, input, and feedback. Contact us today to schedule a time to talk with a mentor who can help you develop your KPIs and stay on the road to success.