How KPIs can improve your business
Key performance indicators, or KPIs, are values that are measured to help evaluate if you’re reaching your goals. For example, if your goal was to increase your customer database, you could look at a KPI such as new customer sign-ups annually. These are actionable values that help you stay on the path to success for your company.
Most companies monitor basic KPIs, whether they call it that or not. Sales is an area that most companies report on, such as sales dollars, sales growth comps, profit margin, ROI and budget variance, all with the goal of generating revenue. However, this just scratches the surface of the indicators your company could be looking at.
Where to start
The first step in finding the right KPIs for your business is to ask the right questions about your business. Simply put: What do you need to know? Start by asking some preliminary questions: What matters most to your company? What goals do you want to achieve this year? Is there anything that can be improved? Continue to do a deeper dive until you uncover the right objectives for your company. Keep objectives actionable and SMART: specific, measurable, achievable, relevant and time-bound.
Some goals can be tricky to assess as they may not have an obvious indicator to evaluate. For example: Are you providing quality customer service? While it may seem as though this can’t be measured, after some further review, there are KPIs you can look at to help you find the answer, such as conversion rate and resolution time of calls. Even qualitative questions can be supported with the right data.
ERPs and data
Just last month, we shared how an ERP like Mobile Office Manager is a great tool to use to collect data (including some specifics you can collect from MOM). The right ERP will have all your information from customers to finances and projects to inventory. It should have the ability to sort and extract these data points too. Which will be the basis or information behind your key performance indicators.
Common KPI mistake
Beware: Companies may get confuse in the sheer amount of data points available to them. And take the easy way out. Forbes notes that “one common fault of KPIs is people jump straight from the problem to considering what to measure.” Once you have the question you need to solve or goal you need to meet, evaluate all the potential indicators that could be relevant and report on the best-suited KPIs. This takes more time and effort initially. But is worth it in the long run.
For example, going back to the earlier example of increasing your customer database. You could also look at other indicators such as the customer churn rate. Which considers the total lost or inactive customers versus active customers over a given period. This will help you have a richer picture of whether your database has really grown than just looking at new sign-ups.
KPIs worth considering
KPI guru Bernard Marr confirmed that “KPIs are only really useful if you identify the right ones to measure for your business and only measure those ones.” It’s essential to your business to measure what really matters to it, so that your resources aren’t being wasted. That being said, it never hurts to learn more about other KPIs you may have not considered before that just might work for you. Here’s a few:
Average revenue per customer: Know how much value an average customer brings to see approximately how many more customers you would need to meet your growth goals. This can be assessed in smaller periods (ex. Yearly) or their customer lifetime value.
Number of customers per channel
- Discover what percentage of your company is focused on maintenance, modernizations, construction and new projects. This can also be assessed by new leads per channel and conversions per channel.
Conversion rate of new vs current customers
- It’s generally easier to convert current customers than get new ones. See how each type of customer fares when it comes to conversion rates. Assess if this aligns with your business plan.
Sales per representative
- Review how each rep is doing at generating new leads and converting sales. This helps in setting representative performance benchmarks.
Customers per region
- Find out what area has the bulk of your customers. This can be used in conjunction with growth of a region, to see if you should expand into new areas.
- Variance of estimates vs actual cost: Review if you have been accurately quoting your customers on projects or whether there’s room for improvement.
- Percentage of completed projects: See how many projects or contracts have fallen through so you can take action accordingly.
- Current accounts payable: Keep your debts to creditors and/or suppliers top of mind when evaluating your finances.
- Average call response time: For elevator companies, this refers to how quickly a technician can be dispatched to begin emergency or unplanned repairs.
Most of these indicators can work in support of other popular or common KPIs to help you accurately measure if you’re meeting your goals. And remember, less is more. There’s no need to end up drowning in data; identify and use the most pertinent KPIs for your goals.
Keeping all your data in one easy-to-use ERP like MOM can make a big difference in your KPI process. Learn more about how Mobile Office Manager can work for your business now.