Charting a course towards professional success without knowing precisely how your business is performing is like trying to strictly adhere to speed limits while navigating unfamiliar roads with a busted speedometer. Technically possible, but incredibly unlikely. And if you screw up, you won\u2019t just get a speeding ticket \u2014 you\u2019ll see all your profits slip down the drain. But unlike with your car speed, there\u2019s no single metric you can focus on. How should you proceed?<\/p>\n
Well, in an ideal world, every fresh business would come equipped with a healthy set of KPIs \u2014 key performance indicators \u2014 providing enough information for the business owner to keep track of how things are going. Since this isn\u2019t an ideal world, though, you need to set, track and nurture them yourself (title callback!). But here\u2019s the good news: most of the work is a one-time setup deal. After that, everything will be much easier.<\/p>\n
So if you\u2019re ready to get your business under control, keep expenses down<\/a>, and start steering it in the right direction, you\u2019ve come to the right article. We\u2019re going to look at some of the KPIs you might need, cover how you can start tracking them and explain a general process for improving any given metric. How does that sound? Let\u2019s get started.<\/p>\n Pretty much every business will have some general top-end KPIs like how much money they make or how many customers they have, but you obviously can\u2019t stop there. Everything needs to be fully codified and set down in a consistent and meaningful way. Let\u2019s take a look at some common KPIs, and you can gauge how useful they might be for you:<\/p>\n When you take your overall revenue and subtract the material costs of the goods needed to yield it, you arrive at your gross profit, but that isn\u2019t the number you should be concerned about. Your net profit is your gross profit minus any additional costs (often involving marketing or taxation). This is obviously vital!<\/p>\n This KPI consists of your net profit divided by your total revenue, returning a figure that quickly tells you how much profit you\u2019re making on every dollar you spend on sales. This information will give you a good idea of your overall profitability, and thus the sustainability of your business model.<\/p>\n Also Read: How to Pitch Your Business Ideas to Potential Investors.<\/a><\/strong><\/em><\/p><\/blockquote>\n How much cash does your business generate every day, or a week, or month? Being profitable isn\u2019t enough to expand if you\u2019re not bringing in enough money overall, or to avoid operational problems.<\/p>\n Every business with marketing has a point at which it must attempt to turn marketing (initial) leads into sales (seriously interested) leads<\/a>. If your qualified lead rate is low, it can suggest that the first step of your sales process (or the last step of your marketing process) is deeply flawed.<\/p>\n There\u2019s a significant gap between the point at which you bring in leads and the point at which you make sales. During that gap, leads will drop out of contention for whatever reason. The better your lead to close rate, the more efficiently you\u2019re turning leads into sales.<\/p>\n Otherwise known as churn, this KPI concerns the rate at which existing customers leave, and is particularly important for subscription-based businesses<\/a>. The higher the rate of customer turnover, the more rapidly the business must attract new customers to replace them.<\/p>\n The higher the average order value, the fewer orders are required to push up revenue, and the more trust in the company the customers can be presumed to have (they could be buying expensive items, or numerous cheaper items together).<\/p>\n As noted, loyal long-term customers tend to steadily increase in value. This KPI gives you an idea of how much each of your customers is actually worth to your business, allowing you to decide how much to spend on retention.<\/p>\n Using survey feedback, this KPI sorts customers into categories based on how likely they\u2019d be to recommend you to others. The more net promoters you have, the more referrals you\u2019ll receive.<\/p>\n Also Read: 4 Important Metrics To Track For Business Growth In 2019.<\/a><\/strong><\/em><\/p><\/blockquote>\n This is how much it costs you to earn a new customer, and can be calculated by dividing the total you spent on marketing in a given period by how much new customers you earned during that time.<\/p>\n If your business has a significant presence in the PR world, or simply engages in a lot of social media marketing or content marketing\/curation, then your social media follower counts will be worth tracking.<\/p>\n When the average prospective customer arrives on your homepage, how long do they spend there? If they\u2019re not spending enough time to read the entirety of the content you\u2019re using to target them, then you may need to take corrective action.<\/p>\n There are many more possible KPIs to choose from, but this selection should give you a good start. Remember that you don\u2019t need to track them all \u2014 in fact, trying to do so would likely prove counterproductive because you\u2019d be unable to see the wood for the trees. Just aim to pick out the KPIs that are the best fits for your business, and focus accordingly.<\/p>\n The very first thing you\u2019ll need to do (assuming you have a business website, which I think is a fair assumption given the name of this site!) is making sure that you have digital analytics enabled on your business website. If your site runs on a standard CMS (such as WordPress), it shouldn\u2019t be too tricky to install Google Analytics \u2014 if your site is an e-commerce store on a popular CMS, though, you\u2019ll have analytics configured by default in your dashboard. Easy!<\/p>\n Thankfully, whether you end up tracking your KPIs through Google Analytics or the internal dashboard system of an e-commerce CMS, you should have fairly similar options. All of the most important stats will be tracked already, making the next step a matter of configuring your view and making some custom tweaks.<\/p>\n If you\u2019re using Google Analytics with a generic CMS, you should look to the following resource: How to Set Up and Track Your Bottom-line KPIs<\/a>.<\/p>\n E-commerce content management systems in particular have a great setup out of the box for viewing stats, and strong integrations for hooking data into other systems, making it ideal for website flippers (if you take a look at Exchange\u2019s array of successful businesses developed with Shopify<\/a>, you\u2019ll see the value of being able to see the exact revenue record of a business asset). And of course, WooCommerce, running through WordPress, has a wide range of plugin options<\/a>.<\/p>\n Regardless of your exact system, the ultimate goal of this step is to end up with a dashboard that gives you an at-a-glance view of the KPIs you selected as the most important for your business. If you can establish that, you\u2019ll never need to spend hours poring through your data trying to figure out where your business is falling short. It\u2019ll be clear from your dashboard.<\/p>\nSet: How to Choose the Right KPIs for You<\/strong><\/h2>\n
1. Net profit<\/strong><\/h3>\n
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2. Net profit margin<\/strong><\/h3>\n
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3. Operating cash flow (OCF)<\/strong><\/h3>\n
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4. Qualified lead rate<\/strong><\/h3>\n
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5. Lead to close rate<\/strong><\/h3>\n
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6. Customer turnover<\/strong><\/h3>\n
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7. Average order value<\/strong><\/h3>\n
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8. Customer lifetime value<\/strong><\/h3>\n
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9. Net promoter score<\/strong><\/h3>\n
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10. Customer acquisition cost<\/strong><\/h3>\n
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11. Social media followers<\/strong><\/h3>\n
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12. Average time on site.<\/strong><\/h3>\n
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Track: How to Configure Your Digital Analytics<\/strong><\/h2>\n