Stage 49 of this year’s Tour de Profit is designed to take your race plan from a collection of great ideas and potential business-building strategies and convert it into a meaningful set of measures and metrics that you can use to track your progress and quantify your results. This is where you define your Key Performance Metrics (KPI).
Before we start, let’s get clear on what KPI’s are and what KPI’s are not. KPI’s are not the same as your monthly financial measures. They are not revenues, profit, margins or numbers of customers. These are in your business important numbers to knows, but these are “results” of the activities that you are doing in your business. These are the “outcomes” from the decisions you made and the activities you and your team engaged in. These are “backward-looking” metrics.
Your Profit Tip of the Day
Many business owners like to use what happened in the past to be predictors of what will happen in the future. But instead, what we want to do is identify and build a set of metrics that are activity-based and are the inputs that generate the business outcomes. We call these Key Performance Indicators.
Here are a few examples of KPI’s that a business might track and measure:
- Number of Leads Generated
- Number of Appointments Held with Prospects
- Number of Proposals Made
- Average Register Sale
- Average Frequency of Purchase
The list can go on and on. But what you see on this list are early indicators of acquiring a new client, increasing revenues, etc. These early indicators are what you will want to measure to help you “predict” what your revenue and profit growth will be in the future. You want to measure your efforts on a weekly basis, not on a monthly or quarterly basis.
So, with this basic understanding, your assignment this week is to design and build your KPI’s for your next performance period. Go back and review the work that you did in the last stage where you considered the nine critical areas of your business that you must be constantly improving.
In each of the nine critical areas, ask yourself, what would be the best measure of activity or results in that area that would demonstrate that I am making progress in my business? Focus on the activities that you do every week. Don’t make it a complicated calculation. This activity will turn your strategic planning into tangible, measurable activities that everyone can see.
If the critical area is Lead Generation, then consider new leads generated, or the number of networking groups attended, or the number of responses to an advertisement. If the critical area is Delighting Customers, then consider the average score on satisfaction surveys received, or average wait time for your services, or average delivery time on an order.
These are the kind of leading indicators you will want to track and measure to give you a sense of whether you are improving or falling backward. Once you have a list of potential KPI’s that cover all nine critical areas, you can prioritize and select the top five or six that will be most important for your business growth this next year.
Communicate to your team that these will be your KPI’s and instruct everyone on how and when the data will be collected, who will be responsible for updating the KPI graphs, where they will be posted and how you plan to review them regularly.
If you’re looking for more success and freedom from your business, join my FREE, private Facebook Group called The Peloton. It’s where business owners like you are learning, sharing and working together to get better every day! Here’s the link: https://www.facebook.com/groups/jointhepeloton/
Come on – join us! And remember, whatever you do, RIDE HARD!
