Don’t Ignore Business Key Performance Indicators

It's official! 60% of SME's don’t track any Key Performance Indicators (KPI) at all.

In a recent CoachSME Linked In survey, almost 2/3rds of respondents confirmed that monthly KPIs are non-existent in their business. At the opposite end of the spectrum, 20% of businesses track more than 15 KPIs each month.

So, who is right? Well, certainly all of those businesses who do at least measure some of their performance. By tracking performance these businesses have the ability to adjust their activities if something is going really well or where performance is dipping. But just how many KPIs you track depends on your business and your appetite to really know what is happening in your business.

1. You’ll know how you and the business is really performing
2. You’ll know what isn’t working and when to make a change
3. You’ll know which product / customer / market / employee or departments aren’t making any or enough money
4. You’ll know if you are going to hit or miss your targets
5. Help you to track trends as well as seasonality
6. See the impact of a new initiative or project
7. Set a new benchmark standard for even better performance in the future
8. You’ll see where compliance, processes or procedures aren’t working
9. They will highlight excessive waste
10. They tell your employee what is important – what’s get measured gets done!
11. And finally, you’ll will be much more confident when you make decisions in the business.

Additional Information : 3 Pieces of Paper & Financial Plan

If you don’t know where to start then think about your business objectives. For example, if your target is to increase turnover, profit, customers etc. then this will indicate which numbers you need to track. Here are three categories to help you focus your thoughts:

1. Cash, for example
   • Debtors days
   • Creditor days
   • Stock turn days, etc.
2. Profit
   • Sales mix % & £
   • Product margins
   • Product mix
   • Exchange rates etc.
3. Turnover
   • Average order values
   • Number of orders per month, week, day etc.
   • Turnover per employee
   • Client attrition
   • Largest client and supplier as % of turnover

So start 2013 with some meaningful KPIs, then make it a habit to track them.

What are your most important KPIs?