In a constantly changing business environment, what works for your business today, may not necessarily work tomorrow. To ensure that your business continues to grow and thrive for years to come, you need to be monitoring and measuring your business in order to manage it. One way to monitor and measure the health of the business is through Key Performance Indicators (KPIs).
KPIs are financial and non-financial measures of activity outcomes that indicate how a business, or process within a business, is performing. The first step is to determine and develop KPIs that are vital to the growth and success of your business. Depending on your industry, location and departments that you are interested in tracking, there are a number of KPI categories that your business may want to measure. For example, here are some categories of KPIs:
· Product Sales and Service
· Financial Metrics
· Marketing Metrics
· Supply Chain Metrics
· Customer Satisfaction
· eCommerce Metrics
· Healthcare Metrics
· Retail Metrics
Within each category, you can identify specific KPIs to help you track and analyze the business. For example, under Financial Metrics you could track various ratios such as
· Current Ratio – The ability of your business to pay all of your financial obligations within a year
· Working Capital – Measure your business’s financial health by analyzing readily available assets
· Return on Equity – Measure profitability by examining your ability generate revenue for each shareholder
After identifying and tracking the actual results of the KPIs, you should compare them against your plan. The monitoring of KPIs will help you to proactively identify emerging problems and opportunities and to ensure that you are getting the most out of your business plan. It is typically recommended that KPIs are monitored monthly, but this exercise can vary depending on the individual KPIs determined for the business. KPIs should to be available to the appropriate individuals within your business who can digest the information and make change within the organization accordingly. They shouldn’t sit on the boss’s desk, but should be seen by the people in charge of the operation the KPIs are reporting on. Besides tracking KPIs for business growth, they can also be used to help with retainage of high-performing individuals on your team by getting their buy-in on decisions in order to help move them in the right direction.
Remember, there is always an opportunity for your business to be better! If you aren’t monitoring your actual results regularly you may miss out on the next big opportunity or you may cease to exist. Holbrook & Manter has been utilizing KPI’s for their clients and also for the firm for almost a century as we look to celebrate our 100 year anniversary next year. Let us know how we can help your business!