One of the most common business terms today is KPIs (Key Performance Indicators) and rightfully so. Imagine you are playing a pickup basketball game and not keeping score. Then imagine someone shows up with a scoreboard, a scorekeeper, and a couple of referees. How would this change the way you were playing the game? Predictably, because people are competitive by nature, the intensity of the game would instantly increase and each player would play to the best of their ability in an attempt to win! This dynamic of measuring performance has the same effect in business.
When I meet with a business owner for the first time, I often discover they have not been measuring or keeping track of the fundamental KPIs in their business.
The question is what are the KPIs that are on YOUR scoreboard?
For starters, here are 5 basic KPIs that all businesses should be measuring, tracking, and using to evaluate their team’s productivity:
- Conversion Rate:The conversion rate is the % of prospects who “convert” to customers. For example, If you have a retail store, and 100 prospects came in and 60 bought something that day, your conversion rate for that day would be 60%.
- Leads by Source:Let’s say we invested $20,000 in marketing and in our marketing plan we have tv, radio and direct mail. We also have a customer referral program and a customer loyalty program. The question is, do we know how well each of these 5 strategies are working? We do ONLY if we are measuring the results. The easiest way to accomplish this is to ask each customer “how did you hear about us?” and record their answer on a simple sheet that lists all of your lead generating strategies. You’ll be thankful you did this when it’s time to consider renewing your marketing plan.
- Average $ Sale: The average $ sale is the average spent by each customer who bought something. If our total sales for the day were $5000 and 60 customers bought from us, the average $ per sale would have been $83.33.
- Average $ Sale Per Employee: Let’s say we own a restaurant and we have a wait staff. The average $ sale per employee (wait staff) would be the average $ per customer served for that day.
- Break Even Point: The break even point is the amount of sales necessary to break even so that revenue beyond the break even point goes to profit. A business owner should know their break even point for the year, quarter, month, week, and even for each day.
It has been my experience that what we measure gets better! There are plenty of other KPIs to consider and I’ve given you 5 to get started with. If you want more customers, more sales, more profit and marketing strategies that work, start by inspecting what you expect!