Key Performance Indicators (KPIs for short) are nifty little tools. I like to think of them as the business equivalent of all those tests a doctor puts you through to figure out what is wrong with you so they can fix the problem.
KPIs are specific statistical data that your business generates. Based on what this data tells you, you can pinpoint where the problem areas are and create a plan of action for fixing them. OR you can ignore them and wonder why your business won’t grow – or worse.
When I work with an owner or executive of a service business, I use at least 5 KPIs to evaluate the “health and well-being” of the business:
- Weekly Gross Profit Margin
- Weekly Gross Sales
- Average Sales Receipt/Work Order
- # of Sales Receipts/Work Orders completed
- Production Employee Productivity (the people actually performing the service)
Each KPI tells a story. Sometimes the story begins with collecting the information – businesses that are weak on book-keeping and administration find that just getting this information together is a problem. How can you know what the state of your business is if you have no accurate records to measure it by?
When you can evaluate your KPIs over a period of time (I suggest at least 12 weeks to a year), you will begin to spot trends and perhaps even be able to use that 20/20 vision of the past to identify what was going on that affected one. Were gross sales down the month your sales rep was going through a divorce? Or getting married? Probably. Did your gross profit margin tank the month you ran that ridiculously-low price special, the one that resulted in lots of price shoppers but few retained new customers? I bet it did.
For the next 5 blogs, I’m going to look at each of these 5 KPIs individually and give you an idea of what they can tell you about your business.
For the FASTEST way to fix it – hire a business coach that speaks fluent KPI strategy! Of course I had to add that in!