KPI - Key Performance Indicators

As you grow the need to track your progress becomes essential. This is where Key Performance Indicators come in. They can be both a measure of your business performance and an indicator to existing or emerging problems. If you had done a business plan before you started, you would have identified your KPIs so you may have this reporting in place already. But, many of us don't get around to formulating the plan, instead we just get started and stay selling our product or service - jump right in ! So, now could be a good time to sit back and put the effort into the business plan ( and KPIs ) to assist with your continued development.

Each business has its own set of KPIs because each business is different. Setting your KPIs are like setting goals, but you get a lot more specific.

Some examples:

• Conversion rates: the number of sales calls you need to contact to make one sale. So how many calls do you have to make in order to convert one of them into a sale. This will help with your budgeting, but also with thinking of ideas to improve that conversion rate.
  
  
• Sales: setting targets for sales and how you are going to achieve those sales. Also, looking at sales figures and identifying which product/service is most popular. You can then focus on these ones to maximize sales. Again, knowledge of previous sales will help you forecast future sales and setting your budgets ( marketing etc ) to ensure those sales.
  
  
• Benchmarks: you can get industry benchmarks ( go to www.ato.gov.au ) where there are standard KPIs for your industry. You can then compare your costs, sales, price, profits etc to others in your industry.
  
  
• Stock turnover time: the number of times that stock is turned over in a year. We can assume that the more times you turn stock over the better in regards to profit ( if your margins are good ).

How to identify your KPIs:

• Identify those things ( processes/products/services ) that are critical to your success.
• Then work out how you can measure those things.
• Look at how you have achieved in these areas to date. - Then assign targets for those areas that are in line with your future plans ( ie. Budgeting that you can afford to make them happen - so they are measurable and achievable goals. )
• Then of course monitor and manage them to then track the progress of your business in those key areas. Eg: have weekly or monthly reporting of your KPIs

Often when you go through this process you find that your recording systems in your business aren't terribly efficient or helpful to the process. Eg. You may have no idea how many customers you have come through your doors each day, or how long it takes to sell all of your stock - you just never took records of this sort of stuff before. So, you then have to make a commitment to better record keeping within your business systems so that the process of identifying and monitoring KPIs can have is full beneficial impact on the development of your business.

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Disclaimer: This article is for your information, but it may not apply to or be suitable for your situation, so seek professional advice. Youth 2 Youth cannot be held liable for anything resulting from how you use the information provided in this article.