You want success. If that weren’t the case, you wouldn’t be an entrepreneur! But it’s one thing to want success and another entirely to actually achieve it. Some of the most valuable tools at your disposal when it comes to achieving success as an entrepreneur are key performance indicators, or KPIs.
KPIs are key to measuring your progress and performance, providing invaluable insights that let you know when something is working versus when it needs some fine tuning, or even a complete overhaul. KPIs give you actionable insights that help you to understand your business on a deeper level, and those insights are essential when it comes time to make strategic and effective decisions that contribute to the growth of your business. KPIs help you find the success that you strive for each and every day.
How to Choose the Right KPIs for Your Business
Deciding on the right KPIs to inform your business trajectory largely comes down to two things: your industry and the stage your business is in.
KPIs by Industry
Of course, the signs of success of a home contractor are likely to look different to those of a business in the financial sector, for example.
While the owner of a construction business may be interested to know the percentage of equipment downtime and the completion progress of a given project, a business owner in finance is likely more interested in knowing their number of past-due loans or their total uninvested funds. On the other hand, there are some high-level KPIs that apply to businesses across a wide range of sectors: percentage of repeat clients or revenue per employee, for instance.
Explore this list of KPIs organized by sector and discipline to gain an understanding of some of the most beneficial KPIS worth tracking in your particular field.
KPIs by Stage
The most useful KPIs of a newly established business aren’t going to look the same as the KPIs of a longstanding, powerhouse company (however, key performance indicators are a crucial element needed to help transform the former into the latter).
Understand what stage your business is in. Are you a shiny new startup, or has your business been around the block? Maybe a happy medium?
If you’re new to the game, some of your most influential KPIs might include the basics like number of clients, cost of customer acquisition, average order value, and profit margin. Now, all of these factors remain important as your business grows, but they’re particularly crucial when you’re still building the foundations and creating a brand from scratch.
Having worked out the initial kinks of running a business and having already created an organization that’s well on its way to success, a more established business might explore some more complex KPIs. Revenue growth rate, for instance, is useful in determining the growth of a business, and something like staffing efficiency becomes more relevant for businesses who are no longer in their infancy stage.
Apply the SMART Method to Your KPIs
You’ve surely heard of SMART goals – goals that are specific, measurable, attainable, realistic, and timely. Well, KPIs should also be SMART.
One of the most common mistakes that entrepreneurs make with regards to KPIs is that they come on a little too strong and lose sight of what’s realistic. It’s understandable – in fact, ambition and enthusiasm are a part of an entrepreneur’s DNA. However, KPIs are most effective when they’re realistic, meaningful, and actionable.
Focus on a maximum of five to seven KPIs at a time and be sure that they’re the right KPIs for your industry and particular goals at your stage in the process. We recommend a KPI planning process where you clearly outline your business objectives and determine exactly which measurable insights you can use to track your progress toward those goals. Those are your KPIs!
Once You Have Your KPIs, Use Them!
Key performance indicators hold a lot of potential, but only if they’re put to good use. Your KPIs should be clearly communicated across all team members and stakeholders. Make use of reports, presentations, infographics, narratives, or anything else that tickles your fancy. Just communicate!
As your business hits milestones and continues to grow, the most relevant KPIs to your stage will change. That’s why it’s a good idea to incorporate a KPI review into your quarterly business reviews and make sure that you’re focusing on the right KPIs for your business at all times.
AIS Solutions is a full-service accounting, bookkeeping, and tax planning service for small businesses. We can help you to organize the data needed to track your financial KPIs and we can provide any other support or resources you may need as you navigate entrepreneurship and running a small business. Contact us today!