In a recent post, we discussed what key performance indicators are, and how they can help you troubleshoot unexpected problems before they irreparably hurt your business.
That leaves us with the inevitable question: “how do I determine the right KPI for my business?”
Well, you’re in luck. Today we’re sharing five strategies to help you hone in on the right KPI for your business, no matter the size or the service.
1. Avoid The Metrics From The Social Media Analytics World
In the web world, analytics such as total site visitors, total Facebook likes, and social media shares tend to be closely tracked.
These sound like smart metrics to track, but in terms of helping you run your business, they have very little substance.
Imagine you grew your ‘likes” on Facebook from 700 to 40,000 in a year – so what?
Did you make more money in that same time period? Did your business grow substantially?
If not, these are not key performance indicators, but rather feel-good indicators – and a smart business owner needs to recognize the difference.
2. What Are The Top 3-5 Metrics You Can Actually Measure?
Look at the data you have available for your business – do you track sales? If so, do you track it per store, per product category or per salesperson?
Of the available data you can track, which metrics provide the best barometer for how your business is actually doing? If one of these metrics tanked tomorrow, would you have a solvable dilemma on your hands, or would you be in really sore straits?
Pick only the top 3-5 metrics that are solid indicators about the health of your business, and make those your KPI (at least for now). Rather than tracking a distracting number of variables, keep this handful of metrics out in front, month over month. If things go awry, you’ll have a high-level view to help you quickly identify where the problem lies.
3. Try The Vacation Test
Imagine you went on vacation for 4 weeks. Upon returning, how would you measure the performance of the business? Which reports would you ask your staff to show you first to get an accurate pulse on revenue, profit and loss, new leads etc.?
Those reports are your top key performance indicators.
4. Find The “Actionable Insights.”
“Actionable insights” is a hot phrase these days, because the most valuable insights about your business tends to motivate action.
If the KPIs you’ve chosen don’t inspire you to take action, you’re looking at the wrong metrics. A solid KPI leads directly to action.
Here is one I use as the owner of a service business: If I don’t have 10-15 active new business conversations in my pipeline then I know in about 3-6 months we will hit a revenue slump. For me, if this KPI drops below 10 I need to take immediate action!
5. Think Like A Customer!
As a customer, what 3 -5 things would matter to you? Put another way, what 3-5 metrics measure the experience your customer is having with your brand?
Remember: there’s no one right way to determine the best KPI. Find the method that works best for your business, and continuously monitor whether these indicators are providing a truly accurate “health report” on your business.
Food For Thought: White Chili
Like your KPI, there isn’t one right way to make chili – it’s a matter of working with the resources available to you to cook up the best result.
I’ve made many white chili recipes, but here is one that I especially enjoy because of the addition of ground cloves. Who’d have thought – ground cloves in white chili!
It only calls for ¼ tsp, and be exact, please. Getting heavy-handed with the cloves is an unpleasant surprise.
3 cups chicken broth
2 19 oz cans cannelloni beans
1 onion, chopped
2 garlic cloves – minced
4 ounces chopped green chilies
2 teaspoons oregano
1 ½ teaspoon cumin
¼ teaspoon ground cloves
Salt and pepper – to taste
4 cups cooked chicken
Monterey Jack cheese
Rinse and drain the beans. Combine all ingredients in a large pot and simmer gently about 1 hour. Serve in bowls topped with grated Jack cheese or wrapped in four tortillas. It freezes well.
Bonnie Massa
Bonnie Massa is Founder and President of Chicago-based Massa & Company, Inc. She works with companies and nonprofits to make the best use of their information about customers, partners, donors and sponsors. With more than 40 years of experience in marketing and predictive analytics, Bonnie is passionate about helping clients make informed, data-driven decisions to increase the value of their customer base. She strongly believes that making pasta and ice cream from scratch are worth the effort, and she spends much of her free time testing and re-testing that theory.