The old adage 'what gets measured gets improved' is worth remembering, especially if you're a small business owner.
Whether you're a freelance web designer or a self-employed plumber, every business needs a way to measure success and work out if it's on the right track. The best way to do that is by choosing and using the correct key performance indicators (KPIs).
These are specific and measurable ways to give your business a regular health-check. They should be revisited frequently, and each KPI should be individually tailored to your business. But which key performance indicators matter most?
How to choose your KPIs
Your KPIs should be based on the broader goals of your business. For example, if one of your goals is growth then you should choose your KPI data accordingly. Decide how you would measure growth – an e-commerce site owner might choose a KPI of increasing traffic by 20% and increasing conversions by 5%. This would differ from a tradesman, who might choose a KPI of increasing their client base by 20% and being able to hire an apprentice.
KPIs should always be something that you can control. Growing your client base can be done through marketing and word of mouth, while something like the price of materials is dependent on market forces and is therefore out of your hands.
Getting specific
A good brainstorming session will help you to realise the KPI reporting your business should focus on. Take a notepad and a pen. Write down where your business is now and where you want it to be in one, five or ten years' time. Now you can think about how you're going to get there.
KPIs should always be measurable – 'having the happiest customers' isn't easily measurable, but 'reducing customer complaints by 60%' is. You should also avoid concrete financial figures – KPIs aren't about money, they're about development. You might choose ‘grow the business by 50%' but not 'make £40,000'.
It can be easy to get bogged down in the small stuff, so keep a tight focus and only write KPIs for your main goals. Try to create at least four KPI metrics and no more than ten.
KPI examples
Customer satisfaction and employee, financial and operational performance are all areas of your business that lend themselves well to KPI creation. Again, this will depend on your business. If you're a sole trader, for example, you won't need to worry about employee performance, while if you own a small shop this will be a key consideration.
KPIs also differ for online and offline businesses. For example, a company with a large web presence might have KPIs around social media presence, bounce rate, page views, conversion and search engine rankings. An offline business may have a higher focus on operational performance such as wastage, equipment effectiveness, time spent on tasks and project costs.
Whatever KPIs you decide to measure for your business, the important thing is to be realistic. Having real, achievable goals will give your business a solid platform for growth in the years to come.
