KPIs encompass the critical business objectives of SMEs and SMBs. Tracking the right KPIs help in measuring overall business success.
Understanding KPIs
KPIs are one of the sure-shot ways to monitor your performance. Business KPIs can help you assess and stay up-to-date on the progress and goals of your business.
Measuring KPIs is a tool to ensure that the most critical objectives are a top priority throughout the team. Once you know what your KPIs are, you can manage workloads accordingly and make sure everyone is handling projects that contribute to your primary goals.
This article discusses essential KPIs you can consider to help strategize the next steps for your company.
Financial Positioning
Money is the fuel of business. The amount of money generated is a direct reflection of the success of your small business. The most important financial statements you keep track of are the balance sheet, income statement, and cash flow statement.
The balance sheet explains the financial health of your business, providing necessary statistics on your assets and liabilities. The income statement shows the profit of your business for the given period, whereas the cash flow statement gives the amount of liquid cash your company carries.
In case of any unexpected shortfalls, a remedial plan for revenue generation could be on the agenda.
Sales
For small businesses, it is crucial to keep track of all monthly sales to get an insight into how a company is doing. The sales data helps you analyze what commodity and buyer group to target. Also, the monthly sales report helps determine where you stand compared to the competitors. The KPIs in terms of sales revenue could be set for monthly sales, a percentage increase in monthly sales, a new monthly customer base, etc. Knowing how many new customers got added is a good indicator of measuring business success. With handy statistics, you can predict growth. Similarly, the worrying number alerts you to work on a marketing strategy or similar initiative.
Revenue Growth
Revenue growth rate indicates the rate at which your business is growing. A careful review of your business statements for income, sales, profit, and gross margins will reflect the ranking of the overall performance of your business.
Financial KPIs are the most critical business performance indicators. Here you keep a record of the most transactions to help find out if there are any gaps.
You can track the KPIs using, say, quarterly profit or monthly sales, etc.
Profit & Loss
Every business is subject to fluctuation. Reviewing the profit and loss figures assists you in identifying the pockets of extra expenditures and redundant spending.
You can track the KPIs using, say, quarterly profits, cost of product/business, and the rate of profit or loss.
Accounts Payable
Any business, in a nutshell, requires an inflow and outflow of goods and services. There are different suppliers and vendors associated with the business operation. You periodically need to pay for the raw material, purchases, or services procured. The accounts payable sums up dues and spending on supplies. The record of transactions in AP indicates how much you pay your inflow.
You can track the KPIs using quarterly overhead costs, monthly costs per transaction, etc.
Market Share
The loyalty gained in the market is a significant asset in the business. A good market share is a sign of business success: the greater the share, the more likely the rise in revenue. Comparing your share with fellow ventures indicates your positioning, and you can act to place it on the better side.
In the market share KPIs, you can measure the percentage market share of your sales or, say, the number of goods sold per quarter against your competitor’s.
Sometimes, you also need to research the market demands. If your product line with competitors is not performing well in the market, you may work on a product review or introduction of new versions. Working on a market survey will give you tips for capturing the market.
Customer Satisfaction
Keeping the customers and buyers happy by providing them with what they want on time is the key to a successful business. You should keep this category KPI on priority. There are readily available tools and applications available to support your online business. Technology can help you keep connected to your customers and figure out the areas of improvement in dealing with them.
Having a KPI in the CSAT score (customer satisfaction) and measuring the response time in service would help improve your business performance. You can monitor the traction received by your business website and your social media engagement.
On the contrary, the number of user complaints could be another important KPI. This is because it will help you know the flaws in product and service and make use of this opportunity to improve on it. Keeping track of the number of complaints per month and resolutions will be an effective course of action.
In-house resources
Any business runs on internal resources and processes. Inventory, for example, is a key area to keep track of assets and materials. Studying the inventory trend helps you decide what product moved fast or remained stagnated. Tracking the stock to sales ratio or liquidity ratio of inventory helps you make some adjustments to introduce a promotional scheme and offer special discounts, etc.Another internal entity in business is human resources. One of the ways to measure your business success could be knowing your employees. The periodic performance reviews and rewards help staff get open and take ownership of the roles they perform in the business. The employees cooperate in improving the product or service needing value additions and help improve the business performance.
Conclusion
Tracking the right KPIs will help you arrive at a precise plan of action to fill in any gaps found in the expected business outcome. Measuring business performance means checking out the financial figures of your business. Maintaining a record of fund flow is essential to creating a secure tomorrow for your company.
