Written by Erica Miller, EDM Consulting LLC
Have you been overwhelmed and unclear about what your business plan is? Many business owners start a business because they are passionate about a specific product or service and want to share it with the world. However, you may not be too interested in the “business” of running a business. Key Performance Indicators (KPIs) are the quickest way to take your business plan from unclear to strategic. Once your tracking system is in place, you can bring clarity and more hours to your day.
KPIs are the barometer for your business forecast. You must keep a constant and consistent eye on specific trends. Always know your numbers if you do nothing else as a business owner. Continue reading to learn the why, what, and how of KPI tracking. Let’s jump in!
Why should you track your numbers?
Tracking key performance indicators helps to measure your success and identify areas that need improvement. You can identify trends and quickly see areas of opportunity and growth. Once you have tracked your data for several months, you can make knowledgeable decisions on your next steps.
Tracking your data also provides a resume for your business. You can easily pull out the highlights of your accomplishments. Share these insights with your clients to help validate your brand and skills. These numbers can also be used when seeking financing or grant opportunities. Save yourself the time and stress of scrambling for this information by keeping it in one place.
Finally, keep yourself accountable to your goals. You can’t see the areas you are succeeding or falling short in if you're not keeping track. Celebrate all the accomplishments and milestones as you go to keep yourself motivated and empowered to serve your clients.
What should you track?
You must be specific when it comes to tracking your business data. The primary foundation of tracking data should be your goals. Begin by creating SMART (Specific, Measurable, Attainable, Realistic, and Timebound) goals. Any measurable goals should be tracked. Here are some examples of measurable goals: expenses, revenues, profit margins, conversion rate, reviews, cost of goods sold, inventory turnover ratios, social media stats, and website analytics. Use these as a guide and then get more specific based on your industry. The more specific, the more reliable the data will be. Once you have the goal for the overall year, you must also set specific goals for each time point (daily, weekly, monthly, quarterly).
How should you track it?
Systems are vital to the proper and accurate tracking of your business data. First, you must know where you will get your numbers from and set a schedule for when you will collect the information. The platforms used to run your business should offer a reporting feature where you can collect the information. Compile all the information using a spreadsheet program, like Microsoft Excel or Google Sheets. For your finances, you can use an online service like QuickBooks, and don’t forget the golden rule, keep your business and personal expenses separate. The spreadsheet should include columns for each Key performance indicator, including a total, an average, and a comparison to previous years if you have that information available. For information like conversion, you will need to track separate data sets and then include a field for the ratio—for example, sales conversion = total number of transactions/total clients.
Set a date and time that you will collect your data. For example, you could always plan for the 1st business day of each month before opening for business. This will allow you focused time to gather and review the information.
I’ve tracked everything; now what?
Now that you have accurately and consistently compiled your data, you must put it to use! This is the most essential part of tracking your KPIs. Tracking without analysis is a waste of your valuable time. Review your data and ask yourself analytical questions to help plan your next steps. Here are some helpful questions to ask:
When reviewing your profits, if they are lower than you planned, ask:
When reviewing your client traffic, if it was lower than you planned, ask:
The list could go on, but the primary point is to ask as many questions as possible and be persistent in finding the cause and the solution.
Once you have completed your analysis, you will have a clear action plan. You can be confident in your numbers and the actions taken to achieve and maintain your success!
If the task of tracking your Key Performance Indicators sounds daunting, you are not alone. I’m here to help; I have a proven system to set goals and create a process to track and analyze them.
About Erica Miller, EDM Consulting, LLC
My mission is to empower ambitious business owners to reach their full potential by building systems and processes to increase their profit and productivity. My clients include cake pop makers, skin care companies, healthcare specialists, and more. I empower clients to clarify their goals using my proven system of creating a profit-driven strategy. I used over 14 years of customer service and business management experience to create this system. My services include strategic planning, data analysis, process development, sales management, leadership training, and employee development. Learn more about Erica and EDM Consulting LLC online.