What are your business’s Key Performance Indicators (KPIs)? Are you even keeping score of your business’s performance? When it comes to business results, leaders often have a target in mind (i.e. make more money this year than last year.) You probably have some specific hopes and goals and are trying to move your results toward those targets, hopefully by following a plan. But without measuring performance results, you won’t have the information you need to hit the bullseye.
As a guiding North Star, there are three components that need to be top of mind when measuring business success: revenue, margin, and profitability. While these financial results are guided by your purpose, values, and service differentiators, these elements are the number one tangible success indicators of your business. If you track your progress with components of the top three, you can manage your business effectively.
Remember these top three measures are lagging indicators. It’s important to look at leading indicators for your specific business – what factors are driving the sales. These include things like tracking new customers, website traffic statistics, customer acquisition costs, customer retention or churn, sales pipeline statistics, and production results. These will give you a better idea of what’s going on “under the hood.”
I suggest using a weekly scorecard to keep track of your Key Performance Indicators (KPIs.) Keep your scorecard simple and choose a few key items to track. Here are some leading indicators you may want to consider choosing from:
- Revenue Growth Rate – consistent growth in revenue indicates a healthy business and is a good indicator of future financial performance.
- Customer Acquisition Cost (CAC) – if your CAC is too high, it may indicate a problem with the business model, marketing strategy, or product-market fit and can be a leading indicator of the sustainability of the business.
- Customer Retention Rate – a high customer retention rate indicates that the business is doing well in meeting customer needs, which can lead to more predictable revenue and a better bottom line.
- Net Promoter Score (NPS) – NPS measures customer loyalty and can be a good indicator of future revenue growth. A higher NPS indicates a higher likelihood of customer retention and referrals, which can lead to increased revenue.
- Employee Turnover Rate – a high employee turnover rate can be an indicator of poor management, low employee morale, or lack of opportunities for career advancement. High turnover rates can be costly for a business because recruiting and training new employees can be expensive. This can also indicate that a separate, but important, effort should be made in regard to improving the culture and people side of your work.
- Sales Pipeline – a healthy pipeline indicates that the business is generating enough interest from potential customers and that there is a strong chance of closing deals.
- Cash Flow – monitoring cash flow can help business owners anticipate potential cash shortfalls and take steps to mitigate them before they become a problem, making it essential for the sustainability of any business.
- Website Traffic and Social Media Engagement – an increase in website traffic and social media engagement can be an indication of growing brand awareness, which can lead to increased revenue and market share.
I like to track metrics manually versus a fancy automated dashboard. It lets me know where the number is coming from and to me, it seems to mean more if I manually enter it into the scorecard.
Keeping track of your business’ performance is crucial for its success. Use a weekly scorecard and focus on a few key performance indicators to manage your business effectively. It will help you predict future financial performance and take steps to improve it.
I provide a variation of a Weekly Scorecard here. Contact me if I can help you customize it for your needs.