Raise your hand if you or your workers, in any way, still work remotely post-pandemic.
It’s a common enough reality — maybe more so now even than 2020. Working in sweatpants from the comfort of your home is infinitely better than dress shoes and uncomfortable desk chairs — and cheaper than paying high business space rent prices.
But with so many companies going remote and giving up their brick-and-mortar space, it’s caused a bit of an office space crisis in major cities like NYC (up to 20% of spaces being unused nationwide). That’s looking like an 800 billion loss for urban office real estate value — that’s a KPI to pay attention to… and figure out alternatives for (like converting said offices into rental properties).
Getting creative with turning losses into profits is an important skill for you as a business owner these days.
And I know you understand that. The past three years have forced you to figure out ways to adapt to new realities.
But you couldn’t do it without these really important things that are really the central figures of your business. Yes, I’m talking about KPIs.
But utilizing these performance indicators the right way is more than just printing a report. It’s knowing which ones to set up, how often to track them, and how to organize them into something coherent you can actually use.
And I want you to be able to USE them to keep you sharp and well-positioned for every economic moment — opportune or difficult. Your success matters to you… and to me.
So, let’s start that conversation here: waterbury-cpa.com/make-an-appointment/
Tracking Your Company’s KPIs Effectively
“Performance stands out like a ton of diamonds.” – Harold S. Geneen
Measuring performance in your company is an indispensable tool for small business owners. The standard metric for that measurement: the KPI — or “key performance indicator.”
KPIs are performance quantifiers — recorded and tracked numbers — that have a specific and clear value, such as a dollar figure for increased sales over a certain period. They’re how you see at a glance if your company is on course. You create KPIs by setting that goal — such as a doubling of profits in the next three years — and working backward to decide what has to happen and when.
In many ways, KPIs formalize an instinctive method you have for measuring incremental success. The concept falls down, though, if you don’t track your progress.
So, how should you do that? And how often?
Setting it up
This depends on your company’s goals, but some common KPIs look at revenue (average profits, total revenue, profit margin); employment stats such as turnover, employee performance, and vacancies; customer service (average call time, customer satisfaction); customer retention and acquisition (and the revenue associated with each); and marketing (sales generation, overall effectiveness).
Your specific industry might dictate use of other KPIs, such as website traffic for an e-commerce company, table turns for a restaurant, or rejections for a production line. Among other points:
- Indicators differ in your KPIs. Leading indicators measure the actions you’re taking to reach goals; lagging indicators are the results you’re getting. High indicators measure your company’s overall performance; low indicators measure results from a specific product, department, or other component of your company.
- KPIs must be quantifiable. A salesperson’s revenue during a period is quantifiable. That salesperson’s relationship with a client isn’t.
- Some metrics may require looking at more than one KPI. “Customer service,” for example, can comprise many factors, from delivery time to reps’ responses to product quality.
There’s no set number of KPIs you should be tracking. It’s better to use fewer KPIs and make sure the ones you use are accurate. For each goal you set, set only around six KPIs (that of course correlate to that goal).
How often you should be tracking KPIs
Basically, you’re balancing frequency and time when tracking KPIs — giving concepts a chance to mature but not so long that they spray too far off course.
Some goals (such as annual revenue or employee tenure) can be tracked quarterly or semi-annually and still have time to make adjustments. Other KPIs are more immediate in their lagging/leading indicators. The actions/initiatives that those measure can have a quicker impact on your bottom line.
Customer retention or conversion rates, for instance, require more constant and steadier attention and lend themselves to faster, easier adjustments. For these KPIs, monthly tracking is better.
Here’s another factor: How much time and money do you need in order to adjust once you spot a problem? Let’s say your KPI shows you need to hire two new salespeople to meet an annual revenue goal. That’s a lengthy adjustment involving advertising, time, interviewing, onboarding, and training. The sooner you spot that KPI, the better — meaning tracking frequently is best. It’s the same for product development to boost sales and revenue for the end of the year.
But suppose your KPI shows your customer service people aren’t answering calls within the specified number of rings or customer service emails are sitting unanswered for too many hours or days? That could be a quick adjustment of bringing the problem to the attention of the department manager or talking to the reps directly. The quicker the needed adjustment is to make, the less frequently you have to track the KPIs.
You have a lot on your plate, I know — so set your calendar app to ping you weekly or monthly when it’s time to look at your KPIs. Do push to track consistently. The whole exercise loses effectiveness if you don’t.
Organizing the info
You want to go visual with the reports, rather than using too much text. The quicker the information can be digested, the quicker you can make decisions using it. (This becomes even more important when considering multiple KPIs. Consider using different colors for different departments.)
As charts and graphs come in just enough formats to be completely befuddling, it’s best to look at a few examples as you figure out how to report your KPIs. A lot of small businesses also get started with Google Analytics, (which experts do say that like, many freebies, can take you only so far in your presentations).
When you start out tracking and using KPIs in your Connecticut business, it can feel as much of an art as it is a science. Give yourself time to get the hang of it, and your future self with thank you for making it so much easier to plan strategically for your business.
And reach out to us whenever you need help with tracking KPIs or any other aspect of business growth and development. The door’s always open: waterbury-cpa.com/make-an-appointment/
In your corner,
Emelia Mensa, CPA