Why KPIs Matter To Small Businesses In West Michigan
Management guru Peter Drucker is often quoted as saying that “If it cannot be measured, it cannot be managed.” One of the best ways to determine the state of your small business in West Michigan is by using key performance indicators (KPI). KPIs provide a way to measure how well your small is performing in relation to your strategic goals and objectives. Every KPI is a metric, but not every metric is a KPI.
KPIs are specific metrics that have a direct impact on your small business’s ability to achieve its goals and objectives. Metrics are your “standard practice” measures that add value to your small business, but they aren’t exactly the critical measures you need to achieve. There are several metrics that small businesses can track. Some metrics are industry-specific and others are metrics that nearly every business should track.
Understanding Your Metrics: Why KPIs Matter
As a small business owner in West Michigan, it can be challenging to set growth goals when you don’t have a clear picture of your business’s current financial health. This is where key performance indicators (KPIs) make their impact.
A few examples of common KPIs for small businesses include gross profit margin, revenue growth, customer lifetime value, and conversion rate. When you consistently monitor the right KPIs, you will have an outline of how your business is performing at any given time. This level of insight enables you to proactively correct problems and adjust your goals and objectives as needed. Altogether, KPIs can help keep your small business on track and reveal initiatives and areas of operation where your performances are paying off (or not).
Why You Need to Measure KPI to Manage Your Small Business
Small businesses that keep track of their KPI metrics are two times as likely to meet their targets. Let’s take a look at the benefits of monitoring KPIs and why small business leaders in West Michigan should care about them.
- Analyzing KPIs helps you determine what’s working and what’s not.
- Measuring your KPIs helps you prioritize the activities that bring in the most revenue and get rid of the activities that are no longer worth your efforts.
- You can save costs by adjusting your strategy by honing in on the activities that have the best-performing KPIs.
- Tracking and measuring KPIs will enable you to forecast your profits and gains.
- Monitoring KPIs and comparing them to your objectives and goals will help you better manage your projections.
- Determining how your small business performs in key areas will help you make the appropriate improvements.
You must come up with your own KPIs to meet your specific business goals. The goals of your small business can vary drastically from those of another small business. You have some free reign when determining what KPIs should be measured, but you should make sure they meet certain criteria.
What Should You Consider When Selecting KPIs for Your Small Business?
There are many KPIs that small business leaders might want to focus on. In a world where we are surrounded by unlimited data, it is easy to become frustrated when determining what information to use to better manage your small business. The most powerful KPIs should help your business leaders cut through the static and make better business decisions.
When your KPIs are tracked regularly, these KPIs will help your business manage what you measure. Measuring and tracking KPIs should not be something you do once and never do again. Instead, this process requires a consistent effort by your team, who must regularly work on improving KPIs to achieve your business’s unique goals.
To help select your KPIs, let’s look at some criteria small businesses should consider:
- They are actionable. The KPIs you choose to track and measure should show you the improvements that need to be made to help your business.
- Your KPIs can be measured accurately. Once you establish your KPIs, you should not run into problems tracking them. The best KPIs are easy to quantify and interpret. Any key performance indicator you choose to track and measure should not only be clear-cut measurements but quantifiable as well.
- Your KPIs relate to real-time data. If you want to ensure your business measures what is currently taking place within your business, you must use timely data. Using old data will only offer useful details if the old data is being compared to current data.
- The KPIs must have a positive impact on your bottom line. Whether your goal is to improve cash flow or the customer experience, making any improvement in your KPIs should put you in a better position to meet your goal.
How Can Small Businesses in West Michigan Monitor Their KPI Strategies?
KPI reporting can communicate the progress of your small business towards its performance goals. Your business leaders can access key results instantly, allowing them to make informed strategic decisions. Most small businesses focus on their financial objectives when their main goal is to make it to the end of the month still in business. Therefore, it can be difficult for their leaders to sit down and make plans for the future of the business.
KPI scorecards can be used to monitor your business’s strategy and communicate expectations throughout the business. Small business leaders face competitive markets and generally have a variety of processes to monitor. Measuring is an important part of KPI reporting. KPI scorecards allow for the right actions to be taken at the right time rather than waiting for issues to be noticed in the end-of-the-month reports.
As a small business, you should have an advantage as you can more easily reach an agreement on key decisions and communicate the changes that need to be made throughout every level of your business. When an agreement can be made based on your KPI reporting, you should see improvements in employee engagement. We think it will be easier to get less than 20 employees to agree on a subject than it would be to get 1,000 employees to agree. In a small business, it will also be easier to identify the employees who are hesitant to comply with any new procedures.
Your business has its own specifics. You depend on what your products and services are and how you promote and distribute them. You must know how to identify your most important KPIs. It is also important to combine KPIs in certain areas and track them regularly. We understand how overwhelming it can be to take the first step. That is why we provide our clients with the tools and expertise they need to clarify their strategies and monitor them to ensure they are effective.
Are you ready to ensure that your thriving small business is also a growing business by measuring the KPIs that are aligned to your goals? Contact Envizion IT today to schedule a consultation.
