How To Set KPIs For Your Small Business
Unsure how to keep your business objectives at the forefront of your decision-making?
It’s time to create a set of KPIs that will help you to not only grow your small business, but illuminate the progress needed to achieve your goals.
Business KPIs, key performance indicators, provide a set of specific targets to monitor and gauge business progress.
The best KPIs for small businesses depend on the individual goals and ambitions of your venture. By monitoring key aspects of your business, you can grow and thrive.
KPIs assist in improving and tracking your business without overcomplicating the process with details and data. We’ll talk you through how to set KPIs.
What is a KPI?
KPIs, short for key performance indicators, are the measurable values that clearly reveal the health of your small business. A KPI meaning in business shows the required progress to achieve your goals by tracking what’s important to your business.
KPIs aren’t always positive, they can highlight negative values early on. This helps you identify where things may be going wrong, so you can correct issues before they get too big and out of control.
Why Are KPIs Important For Small Businesses?
KPIs measure business performance. But why are they important?
Here’s how KPIs can help your small business:
Help make key business decisions
Set strategic objectives
Evaluate your processes in real-time
Track and manage processes that are negatively impacting you
Track efficiency and growth
Monitor the health of your small business
Build your resilience
How Do KPIs Differ From An OKR?
The main difference between KPIs and OKR is the approach.
OKR – objectives and key results – are a strategic framework using specific metrics to track goals with a simple, absolute approach. This goal-setting method helps you improve performance by acting as a catalyst for change, usually annually or quarterly.
This differs from the intention behind the goal setting for KPIs, as these are obtainable goals representing the output of a process or project.
The Different Types Of KPIs And Which Ones Are Best For Your Business
KPIs depend on your industry, business stage, and goals.
Just as every employee is different, businesses are different, and KPIs will depend on size, vision, team, and other specific factors.
To ensure KPIs make a difference to your business, it’s crucial that they are tailored to your specific business objectives, how you plan to achieve the objectives, and who is best to process this information.
Track which types of KPIs are needed for your business, here are some examples:
Client retention rate
Revenue per client
Net cash flow
Internal process quality
How To Use KPIs To Improve Your Business Operations
Once you’ve targeted specific KPIs that apply to your small business, it’s time to implement them to improve your business operations. Regardless of your selected KPI, the only way to improve your business performance is by measuring and reviewing your outputs.
Measuring performance is important because it highlights any room for improvement, opportunities, and practical methods to learn and grow. Failures in business are inevitable and a huge part of the journey to success, making KPIs a top priority can reduce and prevent high-risk issues for your business.
Taking the time to set objectives and goals acts as an employee incentive and morale booster, improving business operations internally and externally.
A good practice is following a what, why, how, who, and when process. What will this do? Defining the main objectives of each KPI puts into practice the key observations and goals of your business plan.
Here’s how you can define it:
KPI for revenue growth
What: Increase sales by 50% in 2022
Why: Improve profitability and customer awareness by achieving this target
How: Adapt existing advertising and marketing strategies by focusing on social media platforms, creating stronger brand content etc.
Who: The marketing team is responsible for this metric
When: Review this KPI on a bi-monthly basis
Tips For Tracking And Analysing Your KPI Data
Ensure you are accurately tracking and analysing the data your KPIs present.
Use these tips to guide your process:
Set KPI targets for both the short and long term
Using the right visuals is key to interpreting and implementing the numbers and data to evaluate the success of your efforts
Review the targets with your team, taking opinions and recommendations onboard
KPIs evolve and change with your business needs, don’t be afraid to make adjustments when analysing your progress
Monitoring multiple different KPIs can get complicated quickly, that’s why it might be useful to consider setting up a KPI tracking tool.
Here are the top KPI tracking tools:
- Google Analytics / Google Data Studio
- Cloud accounting software such as FreshBooks, Quickbooks, or Sage
- Social media scheduling tools such as Sprout Social, Buffer, or SEMrush
Tracking KPIs is vital to the health of your business, to make informed decisions to grow your business. Not sure what the next stage is? My New Venture is here to assist from the very start.
Share it with others!