How to Set KPIs For Your Small Business
By Ted Iwere
To understand and measure how your business is growing you need to set up Key Performance Indicators.
As the name implies, a key performance indicator (KPI) is a quantifiable measure that helps business owners track the small business’s ability to achieve its business goals over time.
KPIs help business owners focus on the most important areas that would help them achieve success because it measures the areas critical to their success or failure.
They are also important to show how well the business has performed and help guide the business owner to make decisions on possible ways to improve performance.
In this article, we discuss how to set up KPIs for your small business.
3 Steps to Set Up KPIs for Your Small Business
1. Strategic Goals
The first step to setting up effective KPIs for your small business is to set S.M.A.R.T. business goals.
What KPIs to choose and how to use them depends on your business goals.
Unless these goals are clear, realistic, or have a defined timeframe, your efforts will be in vain.
To avoid this, you have to set goals that are S. M. A. R. T. which means they are Specific, Measurable, Attainable, Relevant and Time-bound.
A good example of a SMART goal is “Increase our revenue by 5% in 12 months.”
With this example, the goal is specific you can measure how we are performing since we stated a target of 5%. It is achievable, revenue is relevant to your business, and we have a timeframe to achieve this goal – 12 months.
2. Choosing Relevant Key Performance Indices (KPIs)
With your goals set, the next step is to choose the metrics to measure your goals.
Small business owners can choose from many KPIs, but the best KPIs are those that are relevant to their specific needs and can be measured against their goals.
I have divided them into Financial and Not Financial KPIs:
a. Financial KPIs – Working Capital, Advert spend, cashflow forecast, gross profit margin, expenses, burn rate, account receivable turnover, sales conversion rates, etc.
b. Non-Financial KPIs – Website and store traffic, customer attrition, customer satisfaction, employee satisfaction, etc.
3. Track Key Performance Indicators
Without tracking your KPIs regularly, you would have no benefit from setting them up in the first place.
To effectively track your KPIs, you must set a regular time for evaluating your performance in different areas of your business.
It can be a daily, bi-weekly or monthly evaluation to take stock of how your business is performing as it concerns your business goal(s) and take appropriate action.
If you need help measuring your business goals and setting up KPIs for your small business, contact Mr Ted Iwere today!!!
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