Posted on 2 August, 2017 | 5 mins
Setting and tracking key performance indicators (or KPIs) helps you unlock your business goals. With literally thousands of different trackable metrics, we know that choosing the right performance indicators for your business can feel daunting. Still, choosing relevant KPIs is an important step towards building the business you want.
How do you pick the right KPIs for your small business or start-up? Setting KPIs is about tracking your priorities and answering the question, “what do I most want for my business?” We already talked about how important it is for small businesses to set KPIs. In short, tracking your KPIs and related metrics removes the guesswork from running your business, so you can make data-driven decisions.
It’s easy to get started. So let's take a look at five KPIs you may want to keep an eye on.
1. Current ratio
Your current ratio is a prime indicator of your business’s financial health. This metric indicates your ability to pay all of your short-term financial obligations. It is a liquidity ratio, or the ratio between your liquid assets and liabilities (some call this a “working capital” ratio). Monitoring this cash flow metric is essential for any business.
A rising number indicates that your business is capable of paying its obligations and may indicate that you can fund further innovative business actions. A negative ratio is a warning: a sign that it’s time to take immediate action. This could involve increasing payment terms with suppliers or reviewing operating expenses and assets. It may also be time to change prices (and to get in touch with your accountant).
The 9 Spokes dashboard makes it easier to track your current ratio at a glance with our Cash Position and Coverage widget. This widget (basically our term for "insight") shows the cash currently in your bank accounts and the coverage rate is your current ratio. It’s good to keep an eye on our Cash and Commitments widget, which will give you supporting information about why your ratio is sitting where it is. This widget is powered by your point of sale (POS) or accounting apps, and shows you a snapshot of your bank balance, your incomings and your outgoing payables or tax.
2. Website goal conversions
Your website is your most valuable marketing tool. You’ve put in a lot of effort (and probably money) into making a beautiful website for your business. You need to make sure that your website is successful and helps you meet your business objectives.
Website conversion is probably the most important metric in determining the success of your online marketing strategy. Website conversions determine whether you’re getting your visitors to do what you want them to do—whether that is buying your product, signing up for your newsletter, registering for a webinar, or filling out a lead or contact form.
With our Website Goal Conversation widget, you can measure the success of your website and identify if your customers are completing the goal you have set for your website. On your business dashboard, you will see a timeline of the total number of conversions and the conversion percentage of your website.
If your website is getting a lot of traffic (check your Website Traffic widget) but your goal conversion is low, it’s a sign that something needs to change. Remember: a good KPI tells you whether something is going right or wrong in your business.
3. Average spend per sale
How much is a sale really costing you? As a small business or start-up, it’s super important to know the answer to this question. Every sale or transaction can initially feel like a success, but part of building a business is knowing when to celebrate—and smart KPIs will help with that.
Set a target average-spend-per-sale figure. Tracking this metric provides valuable information about your customers' purchasing behaviour, while monitoring your average spend KPI will help you identify trends in the sales value of each transaction.
You can better identify strategies that will positively increase your average spend KPI by focussing your attention on your best-selling products. These strategies could include up/cross selling opportunities, product associations, promos and customer loyalty schemes. Also, your average spend per sale can help you identify gaps in your product offering and guide your next actions.
Our Average Spend Per Sale widget compares this week’s average spend with last week’s. This widget is powered by your POS and e-commerce apps. You can monitor this metric on your 9 Spokes dashboard so you can better plan for the weeks ahead.
4. Sales staff performance
It’s important to have KPIs for your staff, too. Set a benchmark for how much revenue you want each employee to generate and communicate this number to your employees. Keeping an eye on this KPI will enable you to better invest in your people. You’ll always know how your sales team is doing and where to focus your people energy.
By tracking this KPI, you could focus your attention on your lower-performing sales staff members and can make data-driven decisions about additional coaching they may need to improve. You can also pair them with your top performers to demonstrate what experience and qualities are required to be on top.
Our Sales Staff Performance widget ranks your top and bottom staff based on the revenue they have generated over the last fortnight. This widget is powered by your Point of Sale app and helps you identify staff members who require additional coaching. The widget also helps to improve their sales performance and to reward those who are performing exceptionally well.
5. Business growth
Business growth is a phenomenal KPI for small businesses. At first, this may seem difficult to determine, but we have found a way to track it. We define business growth as the essential measure of the financial strength of the business, with the metric being the percentage change of absolute revenue and expense figures (and yes, we built a widget to track just that). Your business growth KPI will help you keep an eye on how efficiently you’re managing spending and operating costs, and how effective it has been in controlling total costs or generating revenue.
Want to see this KPI rise? It’s time to think about how to increase profits by implementing different business activities, such as reducing operational expenditures or finding ways to change sales revenue. If you notice a negative trend in this KPI, you can implement a monthly budget flow forecast, set specific goals in relation to increased sales, or shift your focus to high-value ROI (return on investment) in your marketing strategy. The decision, as always, is up to you—but you'll have the data at your fingertips to help you make the right one more often.
Pick your KPIs and be more productive today
We know that you, as a small-business owner and decision-maker, want to find new ways to get everything done. Taking the time to pick and set the right KPIs for your business will help you be more productive by enabling you to make smarter data-driven decisions. Sign up for your 9 Spokes data dashboard and start seeing your business more clearly. A quick glance at your dashboard will show you how your business is doing and guide you in what to do next. Your dashboard displays your KPIs and supporting data in one place, and you can access it from anywhere, on any device.
Wait, did we mention that your dashboard is free? So if reducing expenses are in your list of KPIs, it's another good reason to give it a go.