KPI stands for “Key Performance Indicators”- it signals you whether your business is performing well or not. The thing with measurement data is that having measurement and monitoring data about business is important but it is also important that you are having right metrics. There are several kind of KPIs, and choosing the right one is really important. But how to choose the right KPI. That where we come in the picture. We are here to guide you to choose the right KPI for your business:
1. Your KPI must be directly related your business goal
Every business differs in their goals and objective. Even a single business may have different goals for different quarters. One time, they might want to boost their sales and another they want to increase their conversion rate. Therefore, the KPI developed must revolve around your goals, be it immediate or long term.
If your goal is to boost your sale up by 20% in coming quarter, you KPI must include daily sales, quarterly sales, past sales, traffic of your website and other related factor.
Similarly, if you aim to is grow site traffic by 10%, your KPI must consider traffic status of your side, bounce rate, click-throughs, shares, likes or sources of traffic.
There are some goals to reduce customer service call, then KPI must be developed keeping customers and the factors why they are calling in mind. We can consider the page they visited just before the call, identifying common problems in all calls and etc.
As we can observe from above scenarios that factors to consider while developing effective KPI pretty much depends upon business core goal.
What are your company’s long term goals? What do you want to achieve in next quarter? How can you identify major drawback of your business? What’s on the priority list of you management team? These are few questions to ponder before developing new KPI for your business.
2. Less is more
The best thing about inbound marketing is that, everything can be measured. We can measure the number of clicks, number of audience reached, from where they are coming from, number of views, like or share, the list is really long. With this many information, it is difficult to incorporate every details to find the right KPI.
As a businessman, it is tempting to track every factor in KPI, but in practical, it leads to nothing fruitful. We need to identify the nature of your business, and what part of metric really affect your business and incorporate that into KPI.
In this case, less is more. Identify which numbers are important to you and develop KPI around that.
3. Consider growth of your company
Your KPI depends a great deal on the stage of your business’s growth. The important metrics varies with the growth of the company. Metrics for a start-up is different from metrics of an enterprise.
4. Identify key indicators
There are two types of indicators, Lagging indicator and leading indicators.
Lagging indicator determines the output of past events like, sales made in last month or number of new customers pitched in last week and etc. While, leading indicators determine your present input and how it will help in attaining something in future.
Usually, businesses rely upon lagging indicators as they are easy to monitor. For example, it is easy to find out the number of customers pitched in last month rather than the number of customers they can reach in next month.
But if leading indicators are identified accurately, you can have better chances of being successful.
5. There is no one KPI
It is very crucial to understand that, there is no single KPI formula for every business. Every business is different in nature and their goals, therefore, every business will have to develop their own formula for successful KPI.
As it is said, “you improve if you measure”, if you measure your performance, you will see where you need to improve. While there is no step-to-step guide to for choosing the right KPI for your business, but there are few factors that could be taken into consideration. Every business is different in one way or another, therefore there is no go-to KPI for business. Above were the few points to consider when developing a KPI. If you have any doubts, query or suggestion, please drop them in comment section below.Tags: account, accounting, business, Finance, KPI, startup, successful