Key Performance Indicators To Track The Health Of Your Business
Small business owners should develop key performance indicators as a way to track, measure, and improve their business. It is one of the most effective ways to know exactly where you stand.
These indicators can help the small business owner focus on what’s important to their business and can serve as a measuring tool to track the progress towards of business goals.
Through a gap analysis, the business owner can get a clearer picture between where he is and where he wants his business to be. There are other measuring tools like balance scorecards and results based management, but key performance indicators are simple to develop and track, so they are easy to use in measuring business performance.
Key performance indicators measure what you have decided are your business success factors. Each business needs to develop its own KPI’s, because there are no two businesses exactly alike.
There is so much information available these days, through Google analytics and other statistical resources, that it is easy to get lost in the numbers.
Key performance indicators can be grouped as follows:
• Output KPIs measure the financial and nonfinancial results of business operations. A few examples would be “Sales,” “Gross margin,” “Net Profit,” and “Number of new clients acquired.”
• Input KPIs measure assets and resources invested in or used to generate business outcomes. Examples include “Investment made in new training materials,” “Funds invested on new equipment,” or “Funds allotted towards the expansion of the business facility.”
• Process KPIs measure the efficiency of business processes. Examples include “Number of hours to return incoming phone calls,” “Hours or days to perform a service or deliver a product” and “Weeks to fully train a new employee.”
There are potentially dozens of KPIs that can be identified in any business but the goal is to select those measures that deliver the most value.
KPI’s make it easy to identify trends, spot problems, and focus on important financial and non-financial issues. They are concise, easy to understand, and help you monitor the health of your business. No business should operate without them.
June 16, 2011 at 9:07 AM
Well KPI allow one thing: measurement and as teh old adagio goes if you can’t measure it then you cannot manage it. Good blog btw
June 22, 2011 at 4:06 AM
KPIs are useful in monitoring if the organization is on track to achieve what it set out to do and make adjustments as necessary. On one hand they should reflect organizational capability: volunteer management, ability to attract financial support, financial discipline, good processes in place. It is not sufficient to have noble objectives set up, it is important to ensure the capacity to deliver as planned. KPIs can be used to assess, monitor and improve this capacity.
On the other hand KPIs are used to monitor the impact of activities in the area of focus of the organization. In this sense they can be input, process, output and outcome indicators. This reflects the ability to use the resources wisely and generate benefits as planned. It is not enough to attract funds, print fliers, distribute them. It is essential to have measure their impact in changing behaviors and making a difference.
Ultimately the value added by KPIs in any sector depends on how they are used.
Best regards,