Importance of Business KPIs

Business KPIs and Metrics: a critical business enabler 

I've been fortunate to have been able to have worked with some great businesses ... though no businesses are perfect.  One challenge that I've seen more pervasive across the board than any other are having and monitoring the right business KPIs and metrics.  More businesses than you may think either do not manage, monitor, and/or even have key metrics that they use to operate and grow a business.

Having the right business KPIs and metrics are critical for a businesses success, however unfortunately, not many business successfully measure performance and success. We'll discuss more the importance of business KPIs and metrics and how to create your own.

Just as a doctor needs to take the right measurements to determine your health, businesses need to track the right KPIs and metrics to determine the health of their business. Without the right KPIs and metrics, businesses are flying blind, and it's only a matter of time before they crash and burn. There are a lot of different KPIs and metrics out there, and it can be overwhelming to try to track them all. That's why it's important to focus on the KPIs and metrics that are most important to your business. What are the KPIs and metrics that will give you the most insights into how your business is performing?

There's no one-size-fits-all answer to this question, as the business KPIs and business metrics that are most important to your business will depend on your specific industry and business goals. However, there are some general KPIs and metrics that all businesses should track.

Here are some of the most important KPIs and metrics for businesses...

Business KPIs and Metrics

I've seen a handful of businesses that measure point in time business KPIs and metrics -- how it went over the past month or quarter.  But they're not looking at trends ... month over month, quarter over quarter, previous quarter / month to current.  These trends give you actionable insights.  Make sure you are looking at trends and just not point-in-time.

1.  Revenue   This is perhaps the most important KPI for businesses. After all, businesses exist to make money, and revenue is the bottom line. Tracking revenue is a good way to measure whether your business is growing or shrinking.
   
   
2. Expenses Tracking - tracking expenses is important for two reasons. First, it can help you save money by identifying areas where you're spending unnecessarily. Second, it can give you insights into your business's cost structure, which can be helpful in making pricing and other strategic decisions.
   
   
3. Customer satisfaction Customer satisfaction is a key metric for all businesses, as it directly impacts revenue. Happy customers are more likely to buy from you again and recommend your business to others. There are a number of different ways to measure customer satisfaction, such as customer surveys and Net Promoter Scores.
   
   
4. Employee satisfaction Employee satisfaction is another important metric for businesses. Happy employees are more productive and more likely to stay with your company. Measuring employee satisfaction can be tricky, but there are a number of different ways to do it, such as employee surveys and engagement metrics.
   
   
5. Web traffic If you have a website, tracking web traffic is a good way to measure how well it's performing. Web traffic can give you insights into how people are finding your website and what they're doing once they're there.
   
   
6. Social media engagement If you're active on social media, tracking your engagement is a good way to measure your success. Social media engagement can give you insights into how people are interacting with your brand and what kind of content they're most interested in.
   
   
7. Sales Tracking sales is a good way to measure how well your business is doing. Sales can give you insights into your business's performance, as well as into customer buying behavior.  What's going into the funnel and what's coming out.  Do you have a multiple (maybe 3-4x) of the quality leads going into the funnel to drive growth?  What is the close timeline from beginning to end?
   
   
8. Conversion rate Conversion rate is the percentage of people who take a desired action, such as making a purchase or signing up for a newsletter. Tracking conversion rate is a good way to measure how effective your marketing and sales efforts are.
   
   
9. Profit margin Profit margin is the percentage of revenue that your business keeps after paying all expenses. Tracking profit margin is a good way to measure your business's financial health.
   
   
10. Cash flow Cash flow is the movement of money in and out of your business. Tracking cash flow is a good way to measure your business's financial health and identify potential cash flow problems.  You can have profit on paper but still be limited by cashflow (and cash).  Remember always, "cash is king".

These are just some of the most important KPIs and metrics for businesses. Tracking the right KPIs and metrics is critical for a businesses success. Without the right KPIs and metrics, businesses are flying blind, and it's only a matter of time before they crash and burn.  Some businesses will use turnaround consulting as an opportunity to get an outsiders opinion, recommendations which helps avoid challenges coming from internal politics.

How can you create your own business KPIs?

Creating your own KPIs and metrics is not as difficult as it might seem. The first step is to identify the most important KPIs and metrics for your business. What are the KPIs and metrics that will give you the most insights into how your business is performing? Once you've identified the most important KPIs and metrics for your business, you need to create a system for tracking them. There are a number of different ways to track KPIs and metrics, such as spreadsheets, software, and online tools. Once you've created a system for tracking your KPIs and metrics, you need to start tracking them.

This might seem like a daunting task, but it's actually quite simple. All you need to do is track the KPIs and metrics on a regular basis and look for trends.   These business KPIs and metrics above roll down -- so that each team below the leadership team will have leading indicators that drive to these metrics.