Why business owners should start using KPIs to drive success
15-10-2024
As a small business owner, it’s easy to get caught up in the day-to-day operations and miss the bigger picture. You might rely on gut feelings or a quick glance at your bank account to determine how well your business is doing. However, without specific measures of success, it can be difficult to truly understand your business’s performance or identify areas for improvement. This is where Key Performance Indicators (KPIs) come into play.
KPIs are measurable values that show how effectively a business is achieving its objectives. Using KPIs can be a game-changer, offering insights and clarity that help you make better decisions, drive growth, and stay competitive. Here’s why you should consider implementing KPIs in your business.
Track your progress more effectively
Running a business can often feel like you’re spinning plates – juggling multiple tasks, dealing with customers, managing finances, and more. KPIs help bring clarity to the chaos by giving you a simple, straightforward way to measure how well you’re doing over time.
For example, if one of your goals is to increase sales, tracking a KPI like ‘monthly revenue growth’ allows you to see whether your efforts are paying off. Or if customer retention is a priority, measuring ‘repeat customer rate’ gives you a clear picture of whether people are coming back or not.
By tracking the right KPIs, you gain insight into how close (or far) you are from your goals and can course-correct if necessary.
Make more informed, data-driven decisions
Many small business owners rely on intuition to make decisions, but KPIs offer a more reliable approach: data. By tracking KPIs, you’ll have access to hard facts and figures that give you a more accurate understanding of your business’s performance.
For instance, if your ‘website traffic’ KPI is increasing but your ‘conversion rate’ is dropping, this would flag up an issue in your sales funnel that needs attention.
Instead of guessing or waiting for problems to surface, KPIs can give you the information you need to make smart, informed decisions and take action quickly.
Increase accountability and focus
It can be difficult to ensure that everyone in your business is working toward the same goals, especially if you have a growing team. KPIs can help keep everyone on track.
When you establish KPIs for different departments or team members, you’re setting an expectation for what they prioritise in their work and this allows you to shape what they focus on.
For example, if your sales team knows they’re being measured on ‘weekly sales calls made’ or ‘lead conversion rates’, they’ll focus on the activities that move the needle.
KPIs not only motivate employees by giving them clear targets to aim for, but they also provide accountability, making sure that their efforts will contribute towards your business goals.
Drive continuous improvement
KPIs are not just about measuring current success—they can also help you to identify opportunities where improvements could be made.
For example, if your ‘stock turnover’ KPI shows that stock is sitting on the shelves for too long, it might be time to review your purchasing or marketing strategies. Similarly, a low ‘customer satisfaction’ score could signal a need to improve your product or service offering.
The process of tracking KPIs, and reviewing them regularly, helps you spot inefficiencies and encourages continuous improvement, so your business can become more efficient and effective over time.
Align your business with long-term goals
It’s important that every part of your business is pulling in the same direction. KPIs can help make sure that your daily operations are contributing to your long-term goals.
For example, if your long-term goal is to increase profitability, you might track KPIs like ‘gross profit margin’ or ‘operating expenses as a percentage of revenue’ to ensure you’re making financial decisions that support that aim.
How to get started with KPIs
Starting with KPIs doesn’t have to be complicated. Here’s a simple guide to help you get going:
- Define your business goals: Start by identifying your key objectives. What are the most important things you want your business to achieve? This could be anything from increasing sales, improving customer satisfaction, or reducing costs.
- Choose the right KPIs: Pick a few KPIs that directly align with your goals. For example, if growth is your aim, KPIs like ‘monthly sales’, ‘new customer acquisition’, or ‘website conversion rates’ may be relevant.
- Make KPIs measurable and realistic: KPIs should be clear, measurable, and achievable. Set targets that challenge your business but are still realistic. For example, ‘increase sales by 10% over the next quarter’ is better than simply ‘grow sales.’
- Review regularly: KPIs are only valuable if you monitor them. Set up regular check-ins (monthly or quarterly) to review your performance against each KPI. This ensures you stay on top of your progress and can make adjustments as needed.
Conclusion
KPIs might seem like tools for big businesses, but they’re valuable for businesses of any size. By implementing KPIs, you can gain better insight into your performance and make sure your business is moving in the right direction.
Whether you’re looking to grow, improve efficiency, or keep your team focused, KPIs can be a real help in running a successful business. Start small, track what matters most, and watch your business thrive.
If you’re not sure where to start, please reach out to us. We have tools and experience on setting KPIs and would be happy to help you.
Employment Rights Bill 2024
The government has published the Employment Rights Bill, which is intended help deliver economic security and growth to businesses, workers and communities across the UK.
The bill will bring forward 28 individual employment reforms, from ending exploitative zero hours contracts and fire and rehire practices to establishing day one rights for paternity, parental and bereavement leave for millions of workers. Statutory sick pay will also be strengthened, removing the lower earnings limit for all workers and cutting out the waiting period before sick pay kicks in.
The existing two-year qualifying period for protections from unfair dismissal will be removed, ensuring that all workers have a right to these protections from day one on the job.
The government will also consult on a new statutory probation period for companies’ new hires. This will allow for a proper assessment of an employee’s suitability to a role as well as reassuring employees that they have rights from day one.
The bill will end exploitative zero hours contracts, following research that shows 84% of zero hours workers would rather have guaranteed hours. They, along with those on low hours contracts, will now have the right to a guaranteed hours contract if they work regular hours over a defined period, giving them security of earnings whilst allowing people to remain on zero hours contracts where they prefer to.
The bill will also:
- Change the law to make flexible working the default for all, unless the employer can prove it’s unreasonable;
- Set a clear standard for employers by establishing a new right to bereavement leave;
- Deliver stronger protections for pregnant women and new mothers returning to work including protection from dismissal whilst pregnant, on maternity leave and within six months of returning to work;
- Tackle low pay by accounting for cost of living when setting the Minimum Wage and remove discriminatory age bands; and
- Establish a new Fair Work Agency that will bring together different government enforcement bodies, enforce holiday pay for the first time and strengthen statutory sick pay.
See: https://www.gov.uk/government/news/government-unveils-most-significant-reforms-to-employment-rights