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"How is my business performing?" The central question in any company, but the answer is not always simple. But if you know how to define the right KPIs, however, you will get you one step closer. It enables the right people to take the right action at the right moment. What more do you need, right?
In this blogpost, we'll share some of our experiences and tips to help you select the KPIs your business truly needs to monitor.
Your company has probably determined a couple of short-term or long-term business goals to achieve. Think of the amount of revenue you want to generate in a specific time frame, the amount of production costs you want to decrease, and so on.
KPIs, or Key Performance Indicators, are measurable values that reveal how a team or company is performing against those business goals. They can help you monitor the progress you've made on any business goal, whether it's in sales, marketing, or any other part of business.
KPIs are always a numerical reflection of your goals. To define them correctly, make sure you first define your goals in a smart way. That's right, KPIs and goals should always follow the SMART criteria:
Don't set your goals too broadly. The more specific, the more focused your efforts will be to attain the goal.
At Luzmo, we make "customer retention" more specific by monitoring the days of inactivity of our clients. Once they surpass a defined threshold, we get in touch to make sure the client's needs are still met.
You need to measure how you're progressing towards your goal. Therefore, KPIs should be countable. If they aren't, transform your qualitative data into a measurable metric.
At Luzmo, we evaluate the needs of our trial leads. To do so, we attribute a "hotness score" to each lead, based on different parameters of platform usage during a trial.
There's no shame in not achieving your goal. But don't set goals of which you know in advance that they aren't realistic. Start with small steps to stimulate growth over time.
At Luzmo, revenue targets increase slowly but steadily each month. This keeps us motivated because the target is realistic, and guarantees a growth curve at the same time.
There's so much data to analyze. Focus only on KPIs that really matter to attain your business goals.
At Luzmo, we set a target on recurring revenue. All other sources of income (e.g. one-time consultancy projects) don't add up to that target, so they aren't included. We don't want to get distracted from our initial goal.
Define your goals in time. Set targets for a specific time period, so there's no discussion on when the target needs to be met.
At Luzmo, we typically define KPI targets on both monthly and annual basis. It keeps us fresh on the short-term, and at the same time it gives us space to attain our yearly target if seasonality kicks in.
Way too often, companies just take over common KPIs from other businesses. Often, those KPIs don't align with their business goals at all. Take your own situation as a starting point. What do I want to achieve? What am I struggling with? Asking those questions helps you define the data you need to monitor.
Here are just a few extra tips when working on your key performance indicators:
But... be aware of the pitfalls! Always see things in perspective: when focusing solely on 1 KPI, it might have a negative influence on others. To give you an example, we organized a "calling contest" to increase our lead pipeline. Our main KPI was to get as many meetings as possible. However, you risk to end up with unqualified leads. So, always make sure that your KPIs are aligned with your ultimate business goal.
When you've successfully defined your KPIs, the next step will be to visualize all that information. With Luzmo, you can easily design real-time KPI dashboards and embed them into any software application. Show them on a TV monitor to guarantee awareness in the whole organization. If you're eager to try it out, sign up for a free trial today - no strings attached!
Experience the power of Luzmo. Talk to our product experts for a guided demo or get your hands dirty with a free 10-day trial.
