The internet and its users create more than 2.5 quintillion bytes of data a day.
Data is so common that most people don't bat an eye at the trail they leave behind. Every time someone visits your site, they leave pieces in their wake.
A lot of of those pieces are useless. But, a lot of them can be used to predict future behaviour and evaluate your business's performance.
Furthermore, it's easier than ever to collect that data and turn it into something useful for measuring business growth over time.
Keep reading to learn more about business KPIs (key performance indicators), how to choose them, and how to use them.
The future of your business depends on it!
What are Business KPIs?
Business KPIs are numerical metrics that track the performance of your business in alignment with your goals. Tracking your progress gives powerful insight into bottlenecks, areas that need improvement, and your strongest assets.
Data-driven organizations are 3X more likely to make positive business decisions. KPIs provide quantifiable data you can use to make strategic decisions and plan for the future.
KPI's are broken up into the following groups:
- Marketing: How are your marketing strategies performing?
- Sales: How well is your business attracting customers, retaining them, and generating revenue?
- Management: Is your business on schedule and meeting important milestones? Are you getting a return on your investment?
- Financials: What do your profit margins look like? Are you within your budget? Do you have positive or negative cash flow?
Metrics vs. Business KPIs
Metrics and KPIs, although similar, are not the same. It's easy to confuse the two but they aren't interchangeable.
Any numerical data you gather from your business activities is a metric. These come in the form of numbers, ratios, percentages, or amounts of time.
A business KPI uses metrics to track achievements for a specific objective.
Here's an In-Depth Metrics and KPI Example
Pretend your objective is to improve your social media presence. You want to achieve this in 6 months or less. After 6 months, you want to know how you're doing.
So, how do you find out?
From your analytics, you know:
- How many visitors you had
- Where those visitors came from
- How long they stayed on your site
- What links they clicked on
- How many of them turned into customers
- The percentage that bought from you again
- How many Instagram/Facebook/Pinterest followers you gained
These are all metrics but they're not all useful for tracking your objective.
The metrics that are useful are proper business KPI's for the specific goal of improving your social media presence.
High-Level and Low-Level: What's the Difference?
High-level business KPIs are an indicator of business performance as a whole. Individuals and departments don't influence high-level KPIs.
Low-level KPIs reflect day-by-day activities and small changes over a short period of time.
As a business owner, evaluating both types is a vital step in the decision-making process. In doing so, you'll understand how your business is performing and how individuals within your business are adding to the team.
Choosing the Proper Performance Indicators
Having a firm grasp on your business goals is a key piece to the KPI puzzle. If you don't know what you want to achieve, how are you going to measure your progress?
Once you understand your goals, you need to decide what has to happen for you to meet them. Common business objectives include:
- Generate more revenue
- Reach more of the right consumers
- Appear in local search listings
- Increase organic traffic
- Keep existing customers
- Stay ahead of the competition
- Maintain and strengthen core values
Choose objectives that align with the goals of your business. It's important to view them as fluid rather than static.
They're going to change as your business grows.
Now, you can decide which metrics are valid indicators for meeting your objectives. Focus on KPIs that allow you to measure progress towards your business goals.
Tips for Choosing Valuable KPIs
Tracking your performance doesn't have to be a pain in the rear. In fact, it should be a quick task. Retrieving the data should be easy.
Evaluating it and understanding why things changed is where you need to focus your time. With that in mind, be sure to choose valuable KPIs that are:
- Easy to access on a daily, monthly, and yearly basis
- Quantifiable and data-driven
- Accurate reflections of business performance
- Within the context of your objectives
- Easy to measure
How to Use Business KPI's to Measure and Encourage Growth
Develop a method of tracking your KPIs over time. This could be in an Excell sheet or with marketing software. Either way, it's important that you do it.
Business KPI's mean nothing at a singular moment. They become valuable as they're tracked and evaluated on a regular basis. Within a few months, you'll start to see positive or negative trends.
As you see them, think about why they're happening.
Are there seasonal fluctuations to consider? Is your market getting smaller? Or is poor performance to blame for dropping numbers?
You can use these trends to determine if you're on track to meet your objectives. If you are, you can focus on other aspects of your business. If you're not, you know exactly what objectives to focus on.
