The Criticality of KPIs

Lowering costs and improving profit margins are critical for every business. Without a clear understanding and focus on revenue, expenses, overhead, and payroll, your business could face significant financial risks. You may feel that prioritizing profit isn't your focus. Maybe revenue is high, bills are being paid, and employees are getting their paychecks on time. But high revenue doesn't always mean high profits, and it can sometimes mask problems with your business. And by the time these problems rise to the surface it may be too late.

Key Performance Indicators (KPIs) are specific metrics that provide detail into how well your business is performing, giving you better insight into what's working and what’s not. These metrics are essential for informed growth and profitability. Many KPIs are valuable for every business, such as those tracking collection rates and overheads. Some customer-centric KPIs measure how many new customers you serve and how often customers repeat for your business. There are a wide variety of metrics you can track depending on the type of business you run and what's important to its success. The important thing is to make sure you're looking closely at, and measuring, these important metrics. Ensure you have the proper systems to track and manage them on a month-to-month or quarterly basis. Developing a process to consistently monitor these areas is essential to prevent unnecessary financial losses and improve your bottom line.

As you measure and analyze your chosen metrics it’s important to create detailed reports and keep track of them for future reference. After a few weeks or months of measuring KPIs you should start to notice trends which will help you make informed business decisions down the road. Compare your performance against industry benchmarks. And ensure everyone in your business is aware of the metrics and any performance goals. Simply measuring these metrics won't make them magically improve - Everyone has to contribute to their improvement.

Regularly defining, measuring, and analyzing KPIs will take some work and practice. But realizing the criticality of KPIs and harnessing their power for your business may mean the difference between failure and success, and how much your business will grow.