Clarity of your goals is the best way to achieve success in business. But it doesn’t stop there – it’s vital to have clarity in the action plans you set to achieve those goals. And similarly, you need clarity in the way you measure your progress. Only with tangible data can you obtain a true picture of your performance.
Setting Key Performance Indicators (KPIs) is one of the most popular and effective ways of tracking your activity in line with your strategy. KPIs are specific, relevant, measurable targets to compliment your business plan. By keeping a close eye on your KPIs you will be in the best position to evaluate, allocate resources efficiently and, if necessary, set new goals.
The key is to ensure each KPI is relevant to an area your strategy has identified will bring growth. When it comes to KPIs, go for quality not quantity – this way the results will help you keep on track and measure only what matters.
Effective KPIs come from the plans you have already set to reach your goals – so, always link back to these to keep a sense of focus. Your KPIs can be related to profits, sales, costs, operations, service, marketing or any other area of the business important to you. If they don’t support your business strategy – you don’t need them.
By setting simply-written, specific KPIs you avoid any misunderstanding of what is being asked. This is particularly important in a company with employees. Keep your KPIs ambitious but realistic – they have to be achievable.
To be of any use to your business, your KPIs must be measurable. Make sure you can track and quantify progress to make fact-based judgement calls for your business. If your KIPs are linked to profit margins, cashflow or costs then you will be measuring them in monetary terms (actual or percentage). Sales KPIs might also be measured in units or the number of repeating/new customers. Marketing KPI measures could be conversions (or better still – cost per conversion), hits on your website or social media connections and engagements. If you plan to do it – you must plan to measure it. And remember, a KPI is meaningless if it’s not set within a time frame – so include a date or timescale for when it needs to be achieved.
Tips of the trade
* Be SMART – Specific, Measurable, Achievable, Relevant and Time-Specific
* Add an action plan outlining how to achieve your KPI
* Use KPIs for benchmarking performance against others in your industry or internally against offices, peers or projects
* Make sure your KPIs give you the data you need when you need it – and be prepared to act on the results!
If you have an accountant, they should be your first stop for business advice. If you don’t have an accountant or they can’t help, why not contact our expert* Rachel at email@example.com or on 07715 489460.
*We’ve picked experts we know and trust who are good at what they do. All of them will give you at least an extra 30 minutes free advice if you contact them and would then charge their normal prices. They don’t pay to be on BuBul and don’t give us any money from anything they earn as an expert.