KPIs Every Business Owner Should Track
While business owners can be tempted to keep their eyes on every aspect of their businesses, there are a few key performance indicators (KPIs) that are the most important to know. In this article, we’ve collected those key KPIs and the reasons they should matter to those who want their business not just to survive in 2021, but to thrive.
Financial Statements
Most business owners know the health of their business by gut feel. Ask them any time, any place, and they can often give you answers that are scarily close to the actual numbers. But great businesses aren’t built on gut feel. You need to know your numbers, and you need to know them regularly.
Now we aren’t just talking about financial ratios (though you should know them too), but you should be measuring and tweaking:
- Inventory turnover
- Customer lifetime value (LTV)
- Revenue per service/product
If you know these KPIs, you can improve your effectiveness, productivity, and cost savings in each area. You’ll also be in a better position to make the decision to stop selling a product/service (or put more money into a product/service) since you’ve been closely monitoring its performance.
Marketing
There are so many ways to effectively track the ROI of your marketing efforts. Armed with this information, you can find out what your customer acquisition cost (CAC) is and if you’re happy with it. While we might always like lower CACs, sometimes the market dictates that we are paying “about right” to get new customers.
Apart from knowing your CAC you should know key metrics from whatever analytics you have installed on your website, including:
- Mobile (what percentage of your customers access your site on mobile vs desktop)
- Channels (how are you getting your traffic)
- Navigation (what path does the customer take on your website)
- Site speed (how fast are your pages loading)
You don’t need to know the exact statistics here, but you need to know the trends and how to address challenges. For example, if your site speed is slow, you need to get with your tech team and address that. You know from your own experience, but statistics also affirm that if a website doesn’t load within three seconds, more than half of potential customers will hit the back button or move on. These same principles apply to whatever reports are available to you on social media platforms apart from the engagement that you can measure on the surface via likes, shares, retweets, etc.
Human Capital
We’ve seen a great migration kicked off by the dawn of widespread remote work. That migration is still ongoing and it’s changing the dynamics of workplaces everywhere. The KPIs of the past were “attendance” and “productivity” and while those have their places, they are really lagging indicators. Better KPIs would be:
- Engagement – how tied are your team members to the mission of the business?
- Happiness – do your team members feel valued?
- Drive – do your team members seek to move forward or grow with the company?
A business owner should know the answers to these KPIs for at least all of his/her direct reports. Businesses run on people, and those people can’t be an afterthought.
Customer Satisfaction
There are a plethora of tools available today to find out how your customers feel about their experience with your brand. There are online reviews across various platforms, comments on social media, surveys via email, and feedback from phone calls, just to name a few. The information you learn from these KPIs can help you determine the health of your business and which way you need to steer it. They can also alert you to blind spots in your product manufacture or service delivery.
Characteristics of KPIs
You can drown yourself and your team in KPIs if you want to: we don’t think that’s a good plan. KPIs should be:
- Actionable (now that we have this data, we can do something to improve our performance)
- Evolving (changes in the marketplace or business situation can force us to change expectations)
- Simple (don’t make someone jump through hoops to provide relevant data)
- Limited in Number (focus on a few key things instead of all of the things)
Feeling unsure what to do about some of the KPIs you’re unhappy about in your business? Give us a call! We happen to know some great people who can help.
