WHAT IS A KPI?
Have you considered using financial KPIs in your business? No judgement if you’ve honestly never thought about KPIs in your entire life or you’d merely added it to business buzzword bingo.
KPIs sound like yet more annoying management jargon but what if we told you it could create more ease, clarity & time for you and your growing business?
We particularly love KPIs because they can offer so much bang-for-buck in impact for small businesses.
This kind of financial reporting is super accessible to small business owners because it’s tailored to what is important to you & your goals and doesn’t require trawling through reams of complex reports.
Read on as we answer your top 5 burning questions about KPIs:
What is a KPI?
KPI stands for Key Performance Indicator (we know - clear as mud right?!)
Put simply, it is any metric that you consider important to measuring your business performance. They provide a high-level snapshot of how your business is doing.
What do good KPIs look like?
Meaningful - help you to identify what will really move the needle in your business.
Measurable - quantifiable data to measure business performance against your goals - after all, numbers don’t lie!
Actionable - help you to course-correct to get things back on track.
Are KPIs only financial metrics?
No! KPIs aren’t just financial, there are many valuable non-financial KPIs you can track:
Things like:
Sales & Marketing – lead to client conversion % or number of website visitors or client renewal rates.
Productivity/Operations – the number hours/days to onboard a client or support response times.
How do I choose the right KPIs for my business?
The beauty of it is YOU get to define what is important based on what you are trying to achieve and this will change over time.
Some metrics will be relevant to any business e.g. profitability. Some may be industry specific e.g. average basket size (ABS) or monthly recurring revenue (MRR).
But the best ones align with your goals & objectives.
Where do I start?
You could use these as a starting point as they work for most businesses:
Total revenue (quarter-on-quarter or year-on year)
Net profit (total revenue - total expenses) i.e. your bottom line
Net profit as a % of revenue
Revenue by service offering/client/product
Then you can add financial or non-financial metrics that you think are critical to driving those key numbers and can be measured. These could be metrics such as:
# of leads per month
Client Satisfaction Scores
Revenue per employee
If you’re reaching for the paracetamol just thinking about logging in Xero and trying to figure our your KPIs - don’t worry. This is our zone of genius at Beaver & Bee Chartered Accountants! Please get in touch to arrange a chat - we’d love to be able to help.
