A couple of weeks ago I started talking about knowing your numbers and promised to get back to you with more… and I’ll be keen to hear what you have learned from the last posting based on your Financial reporting.
Today I will focus on KPI, or Key Performance Indicators and there are many of them to look at in any business. Do you measure where your new enquiries come from, your leads and which of your marketing sources are really giving you a return on your investments. Once you receive an enquiry, do you track your effectiveness at converting that interest to a sale? Are there steps along the way to making that sale, such as client visits, quotations, etc? If so, each has the potential to reduce the chance of making a sale, so each step needs measuring so that you can fine tune your activities, scripts, processes to improve each KPI and therefore your level of success. Once you have made a sale, do you know your average sale value, and set targets to increase it, do they come back, and how often?
It’s a strange thing but, often just by the focus on measuring these numbers, I see clients get an increase, before we even start adding strategies to improve them.
Other areas of the business are equally important to measure, for example in service based industries you really need to keep an eye on your time billed out to clients… hours chargeable vs those not, represented as a simple % figure. All too often I come across busy people complaining they are not making enough, yet when you look into it, a lot of their time is lost through poor productivity and doing unprofitable work or non-income generating work. Imagine working a 50 hour week and only being able to charge 25 hours out to clients… that 50% productive. Multiply that lost 25 hours out against your charge out rate and see what that does to your turnover. Of those 25 hours, what jobs could you pay someone on a lower rate of pay to do for you.
Another cause of being “too busy” is the need to re-do jobs due to errors made, so you might need to measure that as a KPI too. Less re-do’s can save a lot of time, and the double costs in materials too.
In some businesses it is important to have a timely turnaround time, or customer service time to ensure better customer satisfaction. When you know and measure what you are capable of, you can set targets to improve, and even offer guarantees that your opposition can’t expect to manage because you’ll have created a system/process to ensure that you can make your KPI’s.
Is your business system failing you by not tracking all the leaks that it has? When we measure, we have the knowledge that help us identify where things need to be addressed. If we don’t measure, we have no idea… or at best, a gut feeling… and usually not a pleasant one.
Do you have other KPIs that you measure… there are hundreds, so let us know what you are using to run your business so that others can learn.