Let me tell you a dark story.
When I was in college, I used to buy coffee from this local café.
Then one day, something terrible happened. I bought a cup of coffee like always. But when I gulped it down, the stuff burnt my throat.
The coffee was hotter than usual.
Turns out the barista was having a bad day!
If I was taking bets, I’d say the owners of that café weren’t tracking important KPIs like employee happiness. If they were, maybe someone would have noticed the barista’s psychological state.
That was the last time I bought from that café.
The importance of KPIs (Key Performance Indicators)
What are KPIs?
Key Performance Indicators are tools that companies use to track how various aspects of their business are doing.
For example, tracking employee punctuality can help you see who’s coming early and late, and how the latecomers are affecting your business.
Important KPIs to track (and why)
There are many business KPIs, but not all are relevant to every business.
The best way to learn what KPIs are relevant to your business is by conducting a SWOT analysis. A SWOT analysis will help you understand your business:
- Which areas have been working so far and why.
- Weaknesses. Where the business has been failing and the causes of that.
- Opportunities. The areas that can be improved upon.
- The gaps that could potentially be overtaken by your competitors.
You can create a graph or a table to highlight all the information obtained from your SWOT analysis, making it easier for you to identify the important performance indicators you need to track.
Once you conduct your analysis, use these five important KPIs for your business to start tracking your strengths and potential threats right now.
You can start by measuring traditional metrics like attendance, productivity, efficiency, number of errors, etc. Later, you can throw in metrics like happiness, work/life balance, health, salary, etc.
If most of your operations are automated, it will be easier to track employee-related KPIs because all you have to do is check the graphs, reports, and analytics to see who’s performing well and who’s not.
A good tool to automate most of your operations is business process automation software.
Why track this KPI?
Because employee performance matters a great deal to customer satisfaction, process execution, task management, and other business-related operations.
2. Customer service
Some of the most important customer service KPIs to track include:
- Ticket volume – the total number of conversations in your support inbox.
- Ticket backlog – customer support requests left unresolved over a particular time frame.
- Average resolution rate – the median amount of time it takes to completely resolve a customer’s issue.
- Customer satisfaction score (CSAT) – reveals whether a customer experience was good or bad.
Why track this KPI?
Because positive customer feedback is crucial to the success of any business. Knowing the numbers can help you understand how satisfactory or disappointing your services have been.
Every business experiences cash flow in and cash flow out. To understand how you’re faring on the financial front, you need to track important KPIs like:
- Gross profit margin – calculated as (Revenue – Cost of Production)/Revenue.
This helps you understand how profitable (or not) your business really is. It doesn’t include items like taxes, general operation costs, interest, etc. Only the direct cost of production.
- Net profit – the amount of cash left over after you’ve paid all the bills, calculated as Total Revenue – Total Expenses.
This one helps you to determine your operating cash flow.
- Accounts receivable turnover ratio
This measures how fast your customers are paying you. It’s calculated as Net Credit Sales ÷ Average Accounts Receivable, where Net Credit Sales = Total Sales – Returned Items.
To find Average Accounts Receivable, add your beginning balance to your ending balance and divide the total by 2. The period between each balance could be one month or a fiscal year.
A high ratio shows that customers are paying fast, whereas a low ratio shows that you have too many late-paying customers, which is bad for your cash cycle.
If you have late-paying customers, try incorporating an invoicing software into your business. It encourages faster payments.
- Current ratio
This measures whether or not you have the cash on hand to fund a big purchase. It’s calculated as Current Assets ÷ Current Liabilities.
Banks and creditors also use it to determine your creditworthiness.
Every organization usually sets monthly, weekly, or yearly goals. For example, you might target a number of tons to produce in a month, or a number of leads to get in one year.
Whatever your goals are, it’s important to track their KPIs. This will help you monitor their progress to see whether you’re on track or need to change some things.
The KPIs to track for your goals will depend on what the goals are.
For example, if your goal for the month is to get buyers for all your real estate properties, then good KPIs would be:
- Number of inquiries
- Number of property checks
- Number of leads
If the goal for the month is to send proposals to 100 sponsors and get funding for a project, good KPIs would be:
- Number of proposals you can complete with your proposal software in one day
- Number of sponsors responding so far
5# Website/social engagement
In today’s digital world, every business has a website, or at least a social media page. In light of that, it’s important to track KPIs relating to these platforms.
Why? Because these platforms represent your presence in the digital space, and you want to do your best to maintain a good outlook.
Important website KPIs
- Traffic by source – Where are your site visitors coming from?
- Unique visitors
- Organic traffic, domain authority, and search rankings – where does your site sit on Google?
- Bounce rate – How many site visitors are exiting your site abruptly?
- Average session duration
- Dwell time – How long are visitors spending on each of your web pages?
- Pages per session and scroll depth
- Interactions per visit
Important social media KPIs
- Brand mentions
- Profile visits
- Active followers
- How You Can Harness Software To Reach Your Business’ KPIs
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Author: Uday Kumar