There’s no such thing as a business owner who doesn’t want their business to succeed. But sometimes wanting something and knowing how to get there are two different things. And business owners who aren’t tracking KPIs in a meaningful way are setting themselves up for failure.
A Key Performance Indicator, or KPI, is a metric you can use to measure success in your business. However, a KPI will only benefit your business if you’re tracking it regularly. Ultimately, the best way to use KPIs is to track them on monthly basis.
What Are KPIs?
Like the name suggests, KPIs measure something that you consider ‘key’ or critical to your business or start-up. Common KPIs to track include revenue, profit, monthly recurring revenue, profit margins, and staff retention. You can also have different KPIs for different areas of your business (so, separate marketing and financial KPIs, for example).
Developing the right KPIs for your unique company and business goals is critical to success, and something that accountants or CFO’s can help with. You want to ensure that your KPIs are in alignment with your short and long-term goals. In other words, you want to make sure you’re tracking data that is directly linked to your desired outcome.
How to Use KPIs To Measure (And Ensure) Business Success
Measuring the right KPIs for your business is only half the battle. Just as important is tracking what you’re measuring consistently. Remember, you took the time to identify your KPIs because you wanted them to help you reach a desired outcome. But they can only do that if they’re clear, actionable, and, tracked regularly.
The beauty of KPIs is that they let you see at a glance how well you’re performing. But of course, ‘at a glance’ is the operative word here. You have to look at your numbers on a regular basis if you want to make them work for you.
In our experience, monthly tracking is the best approach for most KPIs. Shorter periods can give false impressions, while waiting too long can mean you miss out on opportunities to change course.
When you get regular, monthly reports, you’re able to see where you’re succeeding and where you’re falling short. And – this is what’s really ‘key’ about KPIs – you can use that data to make smart direction changes. In short, you can use your KPIs to help you evolve your business and your practices in a smart, data-driven way.
Of course, this only works if you’ve identified worthwhile KPIs, if you’re tracking them regularly, and you’re understanding what your data means. That’s why we offer monthly KPI Metric Reviews in some of our virtual finance packages. Not only does this consistent monthly reporting help with projections, we also offer guidance and support to help you understand your data and best use it to make informed decisions.
Our passion is helping businesses and start-ups reach their goals with ease, which of course includes helping them with their KPIs. Reach out to learn more.