Top tips for choosing the best KPIs for business success

How do you measure business success? How do you know that your business is on track to reach its goals? Measuring and tracking KPIs (key performance indicators) can give you the visibility you need to make informed business decisions and keep performance on track.

Follow these tips to ensure you only measure the best KPIs for business success:

Measures should align with your overall strategy and value proposition – if your basis of competition is to provide superior customer service, then choose the best KPIs that measure this aspect of performance. If overall growth in customers is your strategic objective for business success, measure volume of customers and retention rate and focus less on value of customer orders.

Only measure things that impact performance – avoid vanity measures such as number of followers or post likes, or web traffic, as they lack context and when measured in isolation do not facilitate actionable information to support decision making.

Avoid measures that contain noise, that are beyond your control – as an ice-cream retailer at the beach, the weather may well impact customer numbers, but having number of rainy days as one of your best KPIs will not lead to long-term actionable decision making and business success.

Only measure what matters to your business, don’t necessarily follow industry norms – you may have an electrical business that only does major works such as home extensions. In this case, repeat business from customers will be less important as a KPI than for an electrical business that focuses on small one-off call out repair jobs.

More is not necessarily better for business success – too many metrics can complicate the picture, especially for small businesses. A small business may need to choose as few as five or six best KPIs, whilst a larger, more complex business may have that number for each department.

Ensure you have readily available data in sufficient volume to give a meaningful metric - if it is too manual to calculate, you will struggle to generate consistent data. For example, customer feedback data can be invaluable for highlighting problems with service delivery or product issues, but you will need to implement an automated system for gathering it, such as text message point-of-sale surveys or NPS. Manually contacting customers for feedback will be both costly and lead to inconsistent data collection.

Adopt non-financial KPIs that your team will understand and from which that they can see a direct link to their actions. For example, percentage of jobs completed on time is a better KPI for an onsite repair engineer than job profitability as other non-controllable factors could impact job profitability.

Check for inconsistencies and weight appropriately – Make sure that the KPIs you have selected do not conflict with each other. For example, quality of work done may be of paramount importance to your business and a best KPI may be defect/re-work percentage. If you also have a KPI measuring the number of jobs a tradesman completes in a day, this may conflict with the goal of superior quality. It is possible to have both measures, but the importance of each should be appropriately weighted so that your team knows which is most important for business success.

Need more help?

Getting started can be daunting, as there are literally hundreds of KPIs to choose from. Remember to focus on what drives success for your business - this is what you should track and report on initially. You can then build from there as you better understand your business performance.

If you are interested in finding out more about KPIs and which ones are best for your business success, email 'KPI' to info@gearchange.com.au and we will send you a copy of our How to Guide: Measuring Success with KPIs.