KPIs or Key Performance Indicators, as the name suggests, are quantifiable measurements defined by a company that reflect the critical success factors of an organization. In simpler terms KPIs can be defined as the pointers that track the outcomes that are of vital importance to a company.
Defining Key Objectives
Since KPIs are quantifiable measurements they differ depending on the nature of the organization. However, every organization that charts out a list of well-defined KPIs is sure to build a greater and more effective success strategy. Start by selecting specific criteria that are consistent with the objectives of the enterprise. This includes taking into account both Financial and Non-financial KPIs.
Financial KPIs
Financial KPI’s are extremely important as they are the most fundamental aspect of any business. The first on the list to be reviewed would be your business’s profit and loss statement. Apart from this you will also be required to analyze your financial goals against plan, comparing it on a month to month, quarterly and annual basis. Work on defining your financial KPI’s with a CPA or experienced bookkeeper. Ask yourself the following questions to determine your financial KPIs:
- What is your profit margin?
- What are your sales targets per customer over the course of a week, month or year?
- What is your prospect-to-customer conversion rate on a daily, weekly, monthly, quarterly and yearly basis?
- What is the cost of your current marketing activities?
- What are the anticipated sales per customer over the course of a week, month or year?
- When have you last analyzed your vendors? How much is paid to each? When was the last time payment terms and/or contracts were renegotiated?
- What are you paying your employees?
Non-financial KPIs
There are other KPIs that are just as important as your financials. These include
- Client/customer satisfaction reviewed on a monthly, quarterly or annual basis.
- This can be defined by analyzing the number of times customers are surveyed, the number of customers who come back for additional business and the conversion rate from lead to client on a month to month basis.
- Employee performance appraisals against job descriptions
This can be defined by studying and analyzing employees to make sure that they are doing what their jobs descriptions say they should do and whether their efforts are providing the expected results.
In conclusion, the key towards defining KPIs for your business is to first develop a set of effective Key Performance Indicators that are critical for your business and then measure them consistently. This will help eliminating your weaknesses and identifying the areas that will bring you success.
