Make a careful exploration of who you are and the work you have been given, and then sink yourself into that. Don’t be impressed with yourself. Don’t compare yourself with others. Each of you must take responsibility for doing the creative best you can with your own life. Galatians 6:4-5 The Message
Running your business can be like driving a car! You might take for granted the constant monitoring of your work while driving. You have a destination locked in (sales and profitability), and you gotta trust your machine to get there. You are following the directions on the GPS and you are looking out the front windshield, monitoring what’s behind in the rearview, and monitoring the dashboard for the correct gear (forward, reverse, overdrive), speed, and fuel availability. You might take these key indicators for granted on most road trips, but on the journey to business success, you can’t afford to drive in the wrong gear, get a speeding ticket or run out of gas. Your dashboard gives you constantly visible, real-time key indicators of your progress towards your goals.
You will want to select a handful of key performance indicators (KPI) for your business. Here is a list of potential KPIs to consider with some explanation for the initial metrics.
Profit: This goes without saying and it is one of the most important performance indicators out there. Gross and net profit margin are valuable indicators of business health (similar to the combination of pulse and blood pressure).
Revenue Vs. Target: This is a comparison between your actual revenue and your projected revenue.
Unit Variable Cost- Actual cost per product produced or sold
Sales By Product or Service: Comparing results at an item level will focus you on the items or services that deliver the majority of your total revenue.
Customer Lifetime Value (CLV): Relevant if your business has a sustaining relationship with a customer. For example, a hair salon or accountant both rely on repeat business. CLV helps you look at the value you are getting from a long-term customer relationship. Use this performance indicator to narrow down which types of customers or what channels gain the best customers for the best price.
Customer Acquisition Cost (CAC): Total all your marketing expenses: advertising, salesperson costs, commissions, subscriptions to web services, etc. This is your Total Acquisition Cost (TAC). Divide your TAC by the number of new customers in the time frame you’re examining. You have found your CAC. This is considered one of the most important metrics in e-commerce because it can help you evaluate the cost-effectiveness of your marketing campaigns.
Number Of Customers: Similar to profit, this performance indicator is fairly straightforward. By determining the number of customers you’ve gained and lost, you can further understand whether or not you are meeting your customers’ needs.
Number of Prospects in the Pipeline: This is especially important for service businesses. A key part of selling the service is creating a pipeline that includes prospects. Prospects are often separated into contacts and prospects. Prospects would be those that have received a bid for your service.
Average Time Spent Per Contract: Another key metric for service businesses. A KPI that tracks how long it takes to convert a contact into a customer reveals the effectiveness of your sales process.
Web Traffic and Conversions: From your email blasts or social media posts how people are opening them, signing up for emails, or clicking through to your offer?
How to Select Your KPI’s: Every business should monitor profit, revenue, and costs. These are critical metrics that will signal the health of the business. Profit and revenue are Outcome Metrics (OM). They measure outcomes or results that occur as a result of how you operate your business.
There are key In-process Metrics (IPM) that predict outcomes. For instance, how many cold calls does it take to get a meeting, and then how many meetings does it take to tender a sales offer or bid? Then of the bids proposed, how many are closed? A closed offer or sale is the outcome, and it will not happen unless the calls, meetings, and proposals are made. The sales are actually beyond your control, but the number of social media posts or calls made each week is up to you or your salesforce.
You will want OM and IPM indicators. If you want to lose weight, as most of us do, then you would clearly measure your weight (an OM). You would also likely measure the number of minutes of exercise each day and the number of calories consumed. (IPMs) Same with your business!
If revenue growth is your KPI, then tracking total revenue each week would be an OM indicator. You can’t change the outcome, it’s just a measure of what has already happened. It’s like looking in the rearview. It’s informative and can help tell you where you’ve been or the state of the business, but you can’t change what’s already happened.
How’s your Spiritual Capital KPIs?
If you set a KPI of deepening your relationship with God.
What activities are predictive, of a deeper relationship with your CEO?
Dashboard: Your KPIs need to be generated as automatically as possible. Your accounting software will be able to generate all of your lagging KPIs. Your social media accounts will be able to generate many leading KPIs. The remainder will require clear record keeping so the computation can be automated.
Once the KPI’s are selected, arrange them into a single dashboard that populates every week or month. Like in a car, the dashboard keeps you on track. The key is to assemble all the KPIs that matter to your business on a single page and use it regularly.
Measure it! is step 6 in the BIB LIFE Growth Path .
BIB LIFE is an Educational Fellowship for People of Faith in Entrepreneurship