A key performance indicator or KPI is a quantifiable measure a business uses to establish its success in meeting the set strategic and operational goals. Therefore, businesses have varied KPIs depending on their priorities or performance criteria.
Developing KPIs should be a priority for small business owners; they are a means to measure, track, and grow businesses. When used properly, KPIs become a significant element of the business’s strategy. For small business owners, measuring the right indicators and developing actionable items could elevate a business above the competition.
If you want results, you must focus on understanding your business’s performance against the measures you’ve set up. If you’re wondering which indicators to use for your small business, check this out.
1. Customer Retention
Acquiring additional customers is extremely important. What is more important is what happens to them once you acquire them. Numerous startups experience failure because of spending more money, time and effort on acquiring new customers and neglecting the existing ones.
While new customers are important, the current ones are far more important. It costs a lot more to acquire a new customer than to up-sell or sell an existing customer. For customers that are currently active, simply inquire what you could do to enhance their experience.
Customers enjoy sharing their opinions, so you’ll have sufficient information. It is also important to establish why certain customers have slowed or discontinued product use. Customer feedback can prove invaluable in fixing problems and enhancing retention with the least effort.
Enhancing customer retention is a crucial determinant and predictor of long-term business success. The concept of customer retention is simple-happy customers that receive regular communication and feel important will always come back. The indicator is also a key contributing factor in the rate of the business’s net growth.
Today’s business environment is highly competitive. Therefore, the impact of attrition on your business could be detrimental to the morale and bottom line. Attrition can involve employee or customer loss.
You must comprehend the causes of employee and customer turnover, the costs related to attrition, and adopt measures to decrease attrition rates in order to reduce attrition.
Attrition remains a huge problem for every small business. Numerous proprietors of small businesses feel as though they are constantly in hiring mode- advertising, on-boarding, and interviewing employees. Nevertheless, adopting the appropriate measures early and spending additional effort in retaining and finding good employees can help decrease the attrition rate.
While customer attrition arises from displeasure with customer service, basic factors such as career advancement or increased salary drive employee attrition. Some of the measures you can take to decrease employee attrition include competitive salaries. Conduct research or have your HR department investigate and determine the earnings in comparable jobs. On the other hand, you can reduce customer attrition by ensuring outstanding customer service and product quality.
Is your business generating money? This indicator is the most apparent and easiest metric to measure. If you business is not generating money, you obviously need to make changes.
Regardless of whether you are making money or not, the amount you are generating, and its source are all vital. You may have a harder time attaining higher revenue streams compared to other companies depending on your product.
For instance, software service businesses frequently face a very difficult time as startups because a large number of users pay incrementally; this means every payment is usually small. Advance payments, longer subscriptions, and wider exposure are good ways of boosting this metric.
Final Thought on KPIs
Realistically, key performance indicators are rarely perfect measures. Nevertheless, their usefulness for monitoring business performance depends on how well the KPIs connect with your business’s main objectives.
Ensuring that the chosen indicators are relevant, strategic, and quantifiable enhances the probability that they will promote transparency and objectivity in performance management.
Dailey Bookkeeping Services is a Xero Certified Bronze Partner and a QuickBooks Online Certified Advisor, so if we can help you with your business analysis, just give us a call, we would love to help you! The owner, Jacqueline Dailey is a Certified Public Bookkeeper, an Advanced Certified QuickBooks and QuickBooks Online ProAdvisor, a Sleeter Group Certified QuickBooks Consultant and a Xero Certified Bronze Partner. We work remotely so we can work with any company located in the U.S. If we can help you with this process or provide you with custom reporting, please give us a call. If we cannot help you, we will refer you to someone who can! Feel free to visit our website at http://www.