With the new year on the horizon, you’re probably thinking about setting your goals for the year ahead. Establishing a few key performance indicators (aka KPIs) will give you clarity into your progress in meeting those goals.
Every business is different. But the goal for everyone should be the same: to understand how your business is doing at a glance.
When you’re determining which KPIs to track, consider the following:
- Your KPIs need to be directly related to your goals and business objectives. When you look at your KPIs, you should know how you are tracking towards meeting your goals.
- Cost-benefit. How hard will it be to track your chosen KPIs? What information is required, and is it readily available? Is it timely? Will the effort be worth the benefit?
Say you were to take six months completely off running your business, leaving your business with someone capable. What three pieces of information would you want to see once a month to know how your business is doing?
Here are some ideas to get you started:
Change in cash
Cash is the lifeblood of a growing business. What’s your minimum balance? Some suggest three months of operating expenses. What’s your number? Is your cash trending upwards or downwards?
Revenue targets
Have you billed your target this month? Are you delivering what you said you would deliver? Are you meeting deadlines? Are you able to do all of the work you’re committing to?
Variance from budget
How is your revenue stacking up against your costs? Did you set a budget for costs and spending? Are you sticking to it? What unforeseeable costs are non-negotiable? Is there any wiggle room to cut or reduce costs? Are you taking home enough money at the end of the day (or month or year)?
Cash conversion cycle
How many days from when you incur the time and costs on a project until you get paid? Service-based businesses are about trading time (or deliverables) for money. Track the days between actually doing the work and seeing the money in your bank account. Do you need to bill or get paid more quickly?
Cost per client or Customer Acquisition Cost (CAC)
How much does it cost to acquire a new customer? What’s your budget for marketing and how many new clients do you want? Are you getting your ROI for your marketing costs?
Net Promoter Score (NPS)
Collect feedback from clients and track customer satisfaction. The NPS is easy. Simply ask your clients, “On a scale of 1 to 10, how likely are you to recommend us to a friend or colleague?” This is a good way to gauge how happy our clients are with your services.
We can prepare a custom report for your business with meaningful KPIs to help you keep moving forward.
Book an appointment with us today to discuss this further.
Read more about Entrepreneur Life topics that may be helpful to you and your small business.
Photo by Jean-Pierre Brungs on Unsplash
