You love your business, but how do you know if your business is doing well? You’ve probably heard the term KPI before, but maybe you think it’s just something for large businesses and corporations. Regardless of the size of your business, setting KPIs is vital for business success.
Let’s start with the basics: what is a KPI? A KPI, or Key Performance Indicator, is a measurable value that tells you just how effective you are at achieving your business objectives. Business objectives are specific and clear resolutions, similar to your New Year’s resolutions, but for your business. Just like a New Year’s resolution can change from year to year as you evolve, so can your business objectives.
Think of KPIs as a planning tool and a way of measuring how your business is doing. A KPI must be a measurable value, or a metric, and are usually ongoing, specific and actionable. Key is subjective: what is a priority for one business might not be to another. It’s up to you to decide your business’s priorities and focus. These are your KPIs, after all.
We are big fans of setting KPIs. The main purpose of using KPIs is to enable you to make better decisions by using data to drive specific actions. Data that you can ‘act on’ are called actionable metrics, and your KPIs should usually fall into this metric category.
However, research suggests that SMEs often fail to set KPIs, and those who do are not keeping an eye on their data. However, small businesses that set and track KPIs regularly are twice as likely to hit their targets. We designed the 9 Spokes business dashboard to make it simple to keep an eye on KPIs and other supporting data.
KPIs: your business’ health barometer
It is important to remember that while all KPIs are metrics, not all metrics are KPIs. However, your other metrics will help you better understand what is going right or wrong with your KPIs.
KPIs help you focus on the things that matter the most and act as an alert system. A quick look at your KPIs can indicate the health of your business. When your KPI numbers change in an unexpected way, your other data will help you figure out what happened and tell you what actions to take. This is why it’s critical to keep an eye on a variety of metrics as well as your KPIs.
With the 9 Spokes data dashboard, you can make smarter decisions because you’ll see all your data in one place. Interactive visualisations enable you to easily understand how your KPI metrics relate to your other metrics. A data dashboard such as 9 Spokes saves a business owner time and they can use it to see just those important business metrics they need to know. So it means no more swapping in and out of different applications.
Let’s say your KPI is to increase your sales by 15% in the next month. Things are on track and then one day, you check in on your data (by looking at your Sales by Week Widget on 9 Spokes) and see that your sales are decreasing by 3%. Your KPI is telling you that something is wrong. You could check your other metrics such as your e-mail campaign performance (using our Campaign Performance Widget) or your staffing (using our Sales Staff Performance widget) to see what has changed over time. With the supporting data, you’ll be able to see what actions to take to get your KPI back on track. That’s why your KPIs should be actionable metrics—that is, data that is impacted by actions and have clear cause and effect.
How do I get started with KPIs?
Start by thinking big: what do you most want for your business? More revenue? More customers? Reduced costs or overheads? Set KPIs by identifying the most important parts of your business. When you ask yourself what you really want for your business, you can more easily set smart, achievable business objectives that can be measured and guide your decisions.
Some of the most popular types of KPIs include Financial KPIs, Operational KPIs, Growth KPIs, and Customer KPIs. You want to select KPIs that will enable you to take action within your business and help keep your business growing.
Keep your KPIs simple. If you can’t describe the metric in 5 – 7 words, it’s probably not a good KPI. Similarly, you should limit the number of your KPIs. These are your business priorities, not just everything you can measure. Be sure to define the parameters of your KPI; each one should have an ideal target with a high and low number around that target.
Manage your KPIs and supporting metrics with the 9 Spokes dashboard. Your personalised free data dashboard brings all your cloud app data to life so you can see your business more clearly. You’ll be able to keep an eye on your key information and be able to react quickly and make smart, data-driven decisions. Your 9 Spokes data dashboard makes KPI tracking effortless.
Stay tuned for our next KPI blog post, in which we’ll dive more deeply into some of the most important KPIs to track as a small business.