UNLOCKING BUSINESS SUCCESS: A GUIDE TO CHOOSING EFFECTIVE KPIs

Givens LLP | May 19, 2023

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In the world of business, Key Performance Indicators (KPIs) play a crucial role in measuring and monitoring the performance of various aspects of your business. Similar to how a compass guides you on a journey, KPIs provide valuable insights that help you navigate toward your business goals.

 

Just as you wouldn't embark on a trip without a reliable compass, it's essential to select the right KPIs to drive growth and make informed decisions. In this blog, we'll explore the art of choosing effective KPIs and the impact they can have on your business success.

The Down-Low on KPIs

KPIs are metrics that measure the performance of a specific aspect of your business to provide measurable and actionable insights that help you make informed decisions to drive business growth.

 

KPIs can vary when looking at different industries, businesses, and goals. Here are some important KPIs to be aware of:

  • Quantitative KPIs, which measure your progress toward a goal. These are numerical, such as the amount of traffic your website gets or your annual revenue.
  • Qualitative KPIs, which keep track of non-numerical information, such as customer feedback or employee satisfaction.
  • Lagging indicators measure outcomes that have already happened.
  • Leading indicators show whether you're on track to hit your target.

 

 

How to Choose KPIs

 

When choosing KPIs for your business, it's essential to consider your industry and what metrics are commonly used to measure success in your field - the best KPI for a tech startup will undoubtedly differ from a long-standing construction company.

 

    1. Identify measures that are expressive and directly comparable to your current status. Set targets and include a time period for achieving them, as well as a clear data source, reporting frequency, and ownership.

      For example, some KPIs you’d want to look into for your business’s accounting department would include:
        • Billable Hours
        • Accounts Receivable/Payable Turnover
        • Gross Profit Margin
        • Cost Revenue Ratio
        • Working Capital
        • Average Revenue Per Customer (ARPC)


    2. Evaluate the quality of your KPIs by considering if they are quantifiable, controllable, connected to your objective and overall strategy, simply defined and understandable, measurable with accuracy and timeliness, give a broad range of perspectives, and remain relevant.


    3. Assign ownership of each KPI to specific individuals within your organization to encourage accountability and investment in its success.


    4. Monitor and report on KPIs regularly and transparently.


    5. Consider using a combination of leading and lagging indicators for a comprehensive understanding of your progress.


     

    We recommend selecting KPIs that are Specific, Measurable, Achievable, Relevant, and Time-bound (SMART). Make sure that you can easily track and analyze your chosen KPIs and that they align with your overall business strategy.

    Choosing the right KPIs is an integral part of driving business success. By carefully selecting metrics that are relevant, measurable, and aligned with your objectives, you gain valuable insights into your organization's performance. These insights enable you to make informed decisions, identify areas for improvement, and drive growth. Remember, just as a compass guides you on a journey, effective KPIs will steer your business towards success.

     

    At Givens LLP, we specialize in empowering entrepreneurs to build profitable and scalable businesses. Our team of growth experts provides timely financial insights and actionable advice that can propel your business forward. Contact us today for more information or download the free Givens Growth Guide for valuable tips on scaling your business successfully.

     

    Givens, where your future is our focus.

    Givens LLP's FUTURE+ Solutions provide businesses with a strategic partner to help them grow and minimize taxes, including a business scorecard, KPIs and executive reports, budgeting and forecasting, cash flow projections and analysis, and business advisory solutions. Contact us today and let us be your Chief Financial Officer to manage the numbers and advise you on building profitability for your business.

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