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What are your Key Performance Indicators (KPIs)?

What are your Key Performance Indicators (KPIs)?

Every business should be able to identify their KPIs. And it goes beyond simply profit and loss statements (which is a financial KPI). Yes, you should always be making money. But KPIs are used to measure your current and future business health.

So what is a KPI?

KPIs vary from business to business and can even be specific to different divisions within larger organizations. But in essence, they’re measurable or trackable items that indicate either something good or something bad - and trigger a response accordingly. There are a wide variety of indicators depending on what you’re measuring. Quantitative, qualitative, leading or lagging, etc. - the trick is identifying what KPIs are important to track and measure for your business.

An example of Nuvonium’s KPIs

Yes, we monitor various KPIs. These help us predict how our business is doing now and how it’s likely to fare in the near future. To ascertain our current health we look at how many open projects that are in progress each week. Over time, we know that if we’re maintaining a certain number of projects, we’re doing well. But we also watch how much current and “future” work is booked at the time. That is, we look at the projects we’re currently working on and that will be worked on next and we keep tabs on what those budgeted fees total. Again, we know the number that means we get to keep the lights on, so if we’re above that, we’re doing well.

But we also track predictive KPIs. Things such as how many estimates are pending or how many proposals are out for review or in draft mode. These give us an insight into how our pipeline is doing. Estimates give us a 30 day predictor whereas lengthier proposals can have 2-3 month lead times. But over time, we know if we’re doling out a certain number of estimates and writing x number of proposals how much work we’ll likely book in the future. So each figure is a good indicator of future prosperity.

Figure out your KPIs

It’s important to determine your KPIs and to monitor them closely. For example. If you operate a frozen yogurt shop - you might track ounces of yogurt sold, number of customers (daily, weekly, and monthly), events or parties booked, and also your profitability per square foot. While each will likely fluctuate over time, a figure of success will emerge - and this KPI can be an indicator of success or problems. And if the indication is there’s a problem - action can be taken before sales tank and things start to melt down.

So analyze your business and determine what your KPIs are so you can start monitoring them. It’s not enough to simply immerse yourself in financial data, since sales data can often lag behind other indicators that would have helped you predict a slump – and hopefully avoid it.

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May 20, 2014
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