How to Increase your Profit and Cashflow using 5 KPIs
With so many KPIs available, we’ve worked out what is essential to give your business the best chance to thrive. By putting a measurable performance indicator in place your business can map its successes and learn from any mistakes.
In this blog we’ll share the essential KPIs, and how to put them in place so that you can tweak to your business needs.
KPIs (Key Performance Indicators) are there to give you a measure of your performance. They evaluate the success of your business, and so can make sure that you’re on the right track and achieving results in line with your predictions.
The right set of KPIs will monitor what’s driving your profit, cashflow and total business value as well as the efficiency of different business activities including sales and marketing.
The four steps to having the best KPIs for your business:
Step 1 – Understand what makes a good KPI
- Is it easy to understand?
A KPI should have a clear definition to avoid any ambiguity around its meaning or purpose.
- Is it measurable?
It’s essential to be able to measure your KPI, whatever it is, be it time / quantity / profit / followers etc.
- Does it align to your business goal or your business strategy?
There’s no point setting KPIs for things that actually don’t matter to you or your business, you’re just measuring for the sake of it, and no one has time for that!
- Will it be relevant in the future?
It’s OK to have some short term KPIs, especially when it comes to project management, but your critical business KPIs are there for the long-run and need to stand the test of time.
Step 2 – Know what your critical KPIs are:
We recommend that you have FIVE core KPIs. These are the ones that will have the biggest overall impact on your business, and directly relate to the goals and strategy you have set.
Just because something CAN be measured, doesn’t mean you HAVE to measure it. We’ve picked our top 5 in line with the business plan we create for our customers.
- Strategic relationships
- Order processing
- Employee experience
- Customer retention
These are just some ideas but there are hundreds of things that can be measured, even for the smallest operation. If you need some direction on what KPIs you should be creating, then get in touch. We can help you find what would work best for your business.
Step 3 – Measuring your KPIs
In step one we said that each KPI should be measurable. Not only this, but it needs to be relatively easy to measure. There’s little point in having a system that is so convoluted it becomes difficult to manage.
It doesn’t matter what you are measuring, as long as you can! Here are some thoughts on what you could be tracking:
- The benefits of a strategic partnership, are you getting out what you are putting in? Are both parties putting equal resources into it?
- Time, how quickly are you turning around orders? How long does it take you to process an order or run through a service?
- Churn rates of your customers, it costs less to retain a customer than it does to win a new one, how are you measuring this success?
- Are your employees satisfied? A simple quarterly or yearly survey could be the key here, again remembering that retaining staff is often more cost-effective than hiring new.
You should aim to monitor your KPIs frequently. The closer you keep an eye on them, the quicker you can react to any negative trends and make any alterations to keep the KPI on track.
It’s sometimes possible to automate tracking and measuring KPIs, saving you time and increasing efficiencies. If you want help to see if this is possible then get in touch with us, we can often find solutions within your existing structure.
Step 4 – Always strive to improve your KPIs
By consistently reviewing your KPIs you should be able to see what realistic improvements can be made and when you need to adjust your targets, keeping your business always moving forward. These improvements should be reflected in your budget and forecasts.
Don’t be afraid to make adjustments and changes to your KPIs. You’ll soon establish what’s working and what needs to be tweaked after you’ve been reviewing them for a while. Understanding what moves your business forwards is essential to success.