We are all familiar with key performance indicators because we use them in our everyday lives. Most of us try to avoid knowing our personal indicators so it does not surprise me that business indicators are also often ignored.
Let me explain. The most common personal indicator used is our weight, and I know the scale is not the friendliest devise ever invented. We often use that one indicator as our gauge for how healthy we are. If it was then the doctors would not have all those tests such as blood tests, EKG’s or even cat scans.
If a doctor needs all these specialized tests to see how our body is doing, then why do we as business owners try to rely on only one indicator for our business. Most business owners only know the current balance in the checking account and that is how they gauge how the business is going. We forget to check other key indicators that could tell us all sorts of information.
My favorite key indicator is reoccurring revenue. For me that is those who return each year for some service, generally tax preparation or CFO services. My goal for my company is an average monthly income of $10,000. Right now, my average is $6,000 so I have a way to go to hit that goal. I avoided tracking that for along time. Not because I didn’t want too but I was afraid if I wasn’t close it would discourage me from trying.
Other key indicators I use is Conversion rates which shows how many people I talk to vs how many become new clients. Cost to acquire a client is also important to track. I know that currently it costs me about $15 to acquire one new client but that is because I use a lot of free social media marketing although I am experimenting now with paid advertising so I’m sure that number is going to go up.
Each industry has special KPI’s they should be tracking. A construction company who does one project a quarter would not want to track reoccurring revenue. A retail company may need to know the average sell per client so they can look at ways to increase that average.
What key indicators do you use for your business? If you need help identifying those or setting up ways to track those indicators so they have meaning to your business, please schedule a time and let’s work on it.