Have you ever heard it said…”Take care of your numbers and your numbers will take care of you”? There’s a lot of truth in this statement from a business ownership perspective. To be effective in small business today you have to understand your numbers. Your numbers will tell you where the gaps are in your business and what you need to monitor to get back on track.
When you go to a physician, what does the nurse do before you meet with the doctor? Simple, he takes your vital signs. Temperature, blood pressure, pulse and yes, sometimes they make you get on the scale. The reason the nurse does this is, just like the gauge on the outside of a pressure cooker, it gives the physician clues as to what’s going on inside your body.
Your business can be viewed, measured and monitored the same way by identifying and measuring the Key Performance Indicators (KPIs) of your business. KPI’s in a business, no matter what size, specifically measures how well a company is performing. Now, depending on the business model, KPIs will vary from company to company.
KPI’s are typically developed to complement a company’s main business goals and they should be the components of the company that have the greatest impact on success or performance. For example, a restaurant might determine that customer satisfaction as a KPI. A sign company might measure their success by repeat customers or referrals. If a company has a goal of being the best employer in their industry, then employee retention is something they will be measuring.
Although businesses can have company-wide KPIs, like customer satisfaction, that refer to the company as a whole, another approach is to break the overall KPIs down into smaller KPIs for individual department in order to better monitor progress and effect change.
KPIs are obviously important to a business because they’re a reflection on how well they are succeeding with particular business goals. Like a physician, you can monitor the overall health of your business by tracking a few very important, yet insightful vital signs.