OMG WTF is a KPI?
If I had a pound for every time someone has asked me what a KPI is, I would be a VERY rich woman.
Business talk amongst business people is often full of jargon, acronyms and abbreviations - some of it is useful, TBH most of it is BS - they make the simple appear very complex.
However ignore KPIs at your peril (I don't mean mortal peril, just that they are extremely useful).
So what exactly is a KPI and how do you use them?
KPI - Key Performance Indicators - in lay terms, all the ways that you measure success in your business.
My Top 10 of why should you measure success (lots of people don't).
1) It's empowering
2) It's motivating
3) It keeps you on track
4) It shows you what's working
5) It shows you what's not working
6) It gives you confidence to try other things
7) It enables you take all the positive potential from mistakes
8) It allows to you set targets & goals that develop your business
9) It ensures that you are able to see the impact of any changes you make
10) Financial measures of success NEVER lie
Let's take that last one. It's the numbers, not words that tell the story when it comes to business. The facts about your business are in the figures. However else you want to interpret what's going on, your financial information takes all the emotion out and tells it like it is.
Yeah, yeah, yeah.......but how do you use that information?
1st - you record your performance against certain criteria -i.e. you put something in place that is going to help you measure how you're doing - a KPI. e.g. Revenue, profit, operating margin
2nd- you look at a variety of things (KPIs) so that you get a broad overview of how your business is doing.
3rd- you measure them regularly
4th- you review them
5th- you use the results to set yourself future target- eventually this leads to setting budgets.
6th- you keep measuring the same things, year on year so that you can see the trends.
Here's an example -
Somewhere like a visitor attraction relies on how many people are coming through its doors every year but the amount of visitors can vary wildly from year to year. Take an Art gallery as an example. The amount of visitors going to a gallery depends both on its permanent collection and what special exhibitions it has that year. If a gallery has a blockbuster exhibition, something that's going to attract a lot of people I.e a Monet or a Van Gogh, then the visitor numbers go through the roof as does the income from admissions and commercial activity. However, the year that these exhibitions happen are exceptional years and if the gallery measured the success of other years against these exceptional years, on visitors and income alone, then every year would come up short. Doesn't do much for morale if the target you're chasing is unobtainable. In this situation what they are more interested in is how many of those visitors did they convert into customers, what the average spend was & operating margin. These types of measures can be measured against other years more relevantly - giving them a more balanced view of business performance.
The more you use them, the easier they get to interpret.
The more you know, the more you can do,
The more you do, the more you're in control,
The more you're in control, the more calculated risks you can take.
The more risk, the bigger the rewards.
The beauty about KPIs is that they are bespoke to you - of course there are the standard financial ones that everyone uses and we would advise that - they are the nuts and bolts of your business. But think about all the other things that you can measure that let's you know how you're doing. Be creative.
Record how many times you went to a networking event in a month & how many clients did you get.
Record how many clients recommended you.
Record how many times you felt really good about a bit of work you did.
Record how much you used social media
Record when you've learnt something new.
Start small and just record the basics. As you get more familiar with the process you get more sophisticated.
So next time someone mentions KPI you can say BTW, I'm OK, let's talk ROI!!
If you'd like to chat more about KPI's then give us a shout. Happy to help. Drop us a line here