Fred and Tom were two young entrepreneurs who had just partnered to start a business. Unfortunately, they were struggling because they didn’t know their numbers, and they weren’t adjusting their business accordingly.
“I don’t know what’s wrong,” said Fred, looking despondently at Tom.
“We’ve been working hard to make this business a success, but it just seems like things are getting worse and worse.”
Tom scratched his head. “It does seem like things have been tough lately. But I’m not sure what we can do about it. Our numbers just aren’t turning out the way we want them to.”
The two men sat in silence for a few moments, contemplating their next move. Finally, Fred spoke up again.
“Maybe we need to get some more education on how to run a business,” he said.
“If we can learn how to adjust our strategies based on our numbers, maybe then we’ll start seeing some improvement.”
Tom nodded in agreement. “You’re right—that might be our best bet. We can go talk to some of the other investors and see what they have to say.”
Eventually, they met a wise old man who taught them the importance of knowing “the numbers” and how to use them to make smart business decisions.
What Are KPIs?
Don’t wait until your business is struggling like Tom’s and Fred’s to start tracking your KPIs. KPIs are a tool business owners use to measure their company’s progress and identify areas of improvement. KPIs can be financial, measuring revenue or profit growth. Or, they can be operational, focusing on customer satisfaction levels or employee retention rates.
KPIs can also be used to measure progress toward strategic goals, such as market share growth or new product development timelines. The important thing is to choose KPIs that are aligned with your business’s overall objectives; otherwise, you risk measuring success in a way that doesn’t matter to your bottom line.
Once you’ve selected KPIs that make sense for your business, establish baseline measurements and track progress over time. This will allow you to see whether your KPIs are moving in the right direction and identify any areas of concern. By regularly monitoring KPIs, you can ensure your business is on track for success.
Three Main Metrics
Metrics are important. They give you a way to measure your progress and identify areas that need improvement.
The three main types of metrics you should track are:
- Key Process Indicators
- Key Performance Indicators
- Key Profit Indicators
Each type of metric serves a different purpose:
- Key Process Indicators help track daily processes.
- Key Performance Indicators help track weekly performance.
- Key Profit Indicators help track strategy progress.
By tracking all three types of metrics, you can get a well-rounded view of your business and identify areas that need attention.
Do you have a process for tracking your KPIs? If not, now is the time to start. Having KPIs in place will help ensure your success.
Gary Harper is the CEO of Sharper Business Solutions. He spent 13 years as an executive in a Fortune 500 company evaluating operation expenses and helping the company reach new levels of efficiencies. Harper began investing in real estate in 2004 and has used his expertise in business systems and process management to develop a program designed to help real estate investors position themselves to scale their business to new levels.
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