If you're starting a new business or seeking to refine your existing one, it's important to have clear goals and objectives. While some entrepreneurs rely heavily on their gut instincts in the early days, this can lead to missteps and ultimately hinder growth.
If you want to avoid those pitfalls, start by setting Key Performance Indicators (KPIs). They'll help keep you on track with your business goals and make sure that you're focused on what needs immediate attention.
What are KPIs?
Key performance indicators (KPIs) set the standard of "key performance" for your business, department or project. They measure how well you're doing at achieving your goals and objectives.
KPIs should be SMART goals – specific, measurable, achievable, relevant, and time-bound. It's important to be specific when setting KPIs because they are used to measure both the success of your business as a whole and specific projects, initiatives, or tasks.
For example: if you're trying to increase sales by 10% this year and you've set goals for yourself (for example, 1,000 new customers), those are KPIs because they identify what needs to be achieved in order for you to reach your goal.
Why are KPIs important?
KPIs are important because they help us ensure that we're focusing on what matters most so that we can stay competitive in our markets and serve our customers better.
But even more important than having the right KPIs is the effort and focus you place on the activities that lead to achieving your KPIs – for example, the operational rigor of doing the right things over and over again; testing, iterating, and reiterating until you can consistently achieve and surpass your KPIs.
That is the most powerful thing you that can come from thinking about and setting KPIs – it's not about hitting your goals once or twice; it's about being able to achieve them with regular enough consistency for you to systematize them and hire a team to optimize them.
How to set your KPIs
In order to set KPIs, you must think about tactics you should focus on to achieve your overarching goals. For example, if your goal is to increase sales by 10%, then you should consider what tactics will help you achieve that. In order to increase sales, you might think that customer acquisition and retention will be important in order to achieve that goal. So now that you have your pathways for success, you'll want to think about the key performance indicators that will help you get there. A KPI for customer acquisition might be "number of new customers acquired per month." A KPI for customer retention might be "number of renewals per month." The final step would be to make them into SMART goals:
- Acquire an average of 10 new customers per month by Q2
- Increase average monthly renewals by 15% by Q2
Setting KPIs is an essential part of any business. They help you determine if your company is moving in the right direction, which is crucial for growth and success. By using the information in this article, you will be able to create a set of KPIs that work best for your organization.
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