Information is available at a faster rate than ever before, and growing.
According to research performed by Forbes contributor Bernard Marr, more data has been created in the past two years than in the entire history of the human race. That’s a lot of data.
If you’re running a business, you’ve likely faced your own data influx. Revenue MTD, Profitability QTD, New Customers Acquired, Cash Flow Forecast, Cost Per Lead, the list goes on… All of these key metrics can reveal valuable information, but only to the extent that it is actually useful and used by your organization. Data collection for data collection’s sake can mean wasted efforts, money, and resources.
However, according to Advanced CFO, for a typical Fortune 1000 company, just a 10% increase in data accessibility will result in more than $65 million additional net income, so keeping track of key metrics is definitely worth investing some time and effort to better understand.
The middle ground lies in selecting the key performance indicators (KPIs) that will reveal the most useful information for your business without sending you into data overload.
When you’re choosing KPIs, there are several considerations you should make.
- Choose KPIs that are directly related to your business goals.
For example, if you want to increase sales by 10% in the next quarter, your KPIs could include daily sales, conversion rates, and site traffic. Or, if your goal was to reduce customer service calls by half in the next quarter, your KPIs might include service call satisfaction, identity of site page visited before the call, and event that lead to the call. Identifying the end goal will help you see the steps you need to take to get there, making your KPI selection that much easier.
- Be selective.
One of the secrets to success is that you can do anything, but not everything. Similarly, with KPIs, you can measure anything, but should not measure everything. Trying to measure it all will quickly result in burnout, data overload, and business stagnation — not the outcome you want. And too much data creates noise, so you are not noticing and focusing on the actual results that will make a difference in your business. Instead, choose a few key metrics that are specific to your business’s strategic plan. Usually between four and 10 KPIs provide meaningful information and can be maintained reliably. You’re gathering enough data to make effective decisions, but not so much that you’re getting overwhelmed.
- Check your growth strategy.
Where is your business at? How long has your organization been in business? The history of your company and strategic plan can make a difference in what KPIs you select. For example, if you’re just starting out, customer feedback, awareness, and retention will be much more important as you get established. But if you’ve been in business for several years and are looking to expand, cost per acquisition, average order size, and number of customers acquired may be more valuable.
- Choose a mix of lagging vs. leading KPIs.
Lagging indicators look to the past while leading indicators look the future. Both are important to business growth — you need to know how you did and how you’re doing — but one shouldn’t be sacrificed for the other. Many organizations typically focus on lagging KPIs — sales last month, number of new customers, hours of service delivered, etc. But leading KPIs can predict the future of your company, which drives growth. These can include website traffic, conversion rates, sales opportunity age, and sales rep activity. Using leading indicators effectively can help you see what’s coming and adjust your course accordingly, rather than reacting to what has already happened in the past. Lagging indicators are still useful, however, to show how effective past strategies were.
- Choose tech that will do the work for you.
One of the best ways to simplify your key metrics process is to pick technology that does the work for you. Tools that quickly allow you to analyze figures and turn big data into usable information are vital to your success. Picking the right reporting services are essential to staying on track with your KPI goals.
SHEA Global can help you create dashboards with KPIs you’ll use. Our consulting services provide you with financial solutions that will bring your business to the next level. Learn more about our services today at SHEAGlobal.com or call 1-866-239-1113.