Key Performance Indicators (KPIs) are business objectives that make it very clear where you are aiming as a business and what you want to achieve at different times. While total revenue may be an indicator, for instance, if you needed a lot of expensive advertising to get that revenue, you need a KPI that showcases exactly what matters, which might be the desired return on investment (ROI) of each advertising dollar.
While KPIs are standard in large companies, it may be harder to figure out KPIs in a start-up or small business, especially when it feels like many things are equally important. Here are some steps to get to your KPIs and ways to make them central in your day-to-day operations.
Brainstorm The Many Ways to Measure Success
Most companies have more than one way that they measure success, and the way to start getting KPIs for your company is to think about all the ways you, as founder, or your employees see themselves as successful. Some valuable questions to ask include:
- What makes a day, week, or month feel successful?
- What initial contacts (phone calls, website visits, or emails sent) tend to have the biggest impact on the bottom line?
- What obstacles need to be overcome before we can see meaningful growth? Does it make sense, for instance, to pour a lot of resources into name recognition so that the dam will burst and a ton of new orders will flood in via word of mouth?
- What aspects of the process are under your control, like how many new clients you approach for meetings, versus under the control of the clients, like online orders completed?
Don’t judge these metrics just yet; focus on trying to come up with as many as possible.
Eliminate “Vanity Metrics” and Other Misleading Stats
There does need to be a moment, however, when you take a critical look at your list. For instance, if you mention website traffic as a potential metric, consider what would happen if website traffic became a KPI. Are there ways that you or your staff could up the total website traffic, for instance, while tanking the conversion rate, resulting in more ad spend but with flat total revenue? Make sure that any metrics that, on their own, don’t spell success must be matched with another metric. In the example above, this would mean your KPI could be to increase website traffic without lowering the conversion rate, which should lead to more sales.
Narrow Down to the Items Everything Else Depends Upon
You’ll likely still have quite a few options on your list. So what can you eliminate? In general, try to see if any two or more metrics naturally climb together so that you only need one of them; if sales appointments booked and sales calls completed are essentially the same number, just grab one of those stats. Eventually, you’ll figure out KPIs, which are the metrics that rise to the top as influential. If your company has already grown, different employees may have distinct KPIs, but they are all feeding into the same mission.
Set Ambitious Near-Term and Far-Term Targets For Your Metrics
Once you know the metric you are looking for, set a concrete goal. These goals are best set with the benefit of past information; if your sales team could make a certain amount of calls in a week usually, aim for 15% more and see if they can make the team more efficient to get there. You can also set goals that are different in the near term than in the far term. Perhaps what you really need to focus on is getting flyers hung up around town and a thriving Facebook followership right now, but eventually, after hitting certain targets, you want your attention to shift to engaging individually with the email list you’ve built because of those first efforts. It makes sense that the focus will change as you grow.
Find Ways to Remind Yourself and Your Employees of the Goal Every Day
There are ways to keep the KPI in view at all times; here are just a few options:
- In idea-driven meetings, ask that all new innovations be framed in terms of their impact on the KPI.
- Note the names of those who are contributing to on-track performance on a whiteboard in celebration.
- Write the KPI on sticky-notes or posters that can be hung around the office.
- Create a way to live-track the KPI through a spreadsheet or other piece of technology, so people always know where they stand and draw inspiration for their next effort.
The goal of these reminders is not to shame people or make them fearful; focus the attention on keeping the company goal-oriented, so that they know why every activity they participate in is connected to that core goal.
Follow Up and Revise Your KPIs After They Are or Aren’t Achieved
While KPIs are either reached or not – they tend to have timelines and can succeed or fail – they can definitely be revised. Have a postmortem after a cycle of performance, perhaps every quarter, where your team evaluates what factors in and out of their control changed the results. Perhaps notice if there were initial signs of growth but a market downturn masked your results and made it look like your sales plateaued when really they should have gone down and the new strategies worked. On the other hand, some KPIs really do reveal problems with the company; investigating after each quarter can allow a company to be open and honest, and it makes sense to do this, even if you are in the earliest stages of your business.
KPIs may seem more important as your company grows and diversifies, but being laser-focused on your goal is helpful way before that. When you know what number you want to move, your company gets the opportunity to know for certain that your work is moving you toward your actual objectives. Even when the objective is to develop new products or other innovation-driven options, you’ll be glad you figured out just how much or how many you want for a particular metric.