We are living through an entrepreneurship boom, where the ability to start an online business, raise substantial seed money, and call yourself a CEO are small steps away. A lot of people learn business on the fly, and are forced to retrace their steps to figure out what went wrong. Also anyone without prior experience in any field needs to keep a close eye on what is getting their business to tick or boom.
A common word that gets bounced around if that happens is KPI. Those strange three letters that stand for Key Performance Indicators are the tool used to track the success of any fledgling business.
The challenge is that there are so many avenues to cover and you as a business owner, manager or service provider must know where to lay the focus for your business needs. To start planning your KPI evaluation – you need to find out what is directly affecting your sales revenue.
Let me give you an example:
Let’s say you have an e-commerce website that you are working on, where you routinely offer your online product. You might be tempted to track your google ranking, or your traffic, or number of monthly pageviews. But all those metrics only affect your sales indirectly.
What is a better set of KPI’s is - subscriber rate, # of sales directly attributed to blog referral and so on. If you have an ecommerce site the KPI’s that you should be tracking could be - conversion rate, cart abandonment rate, average order value.
Conversely, if your target is to increase lead generation you would be tracking things like overall lead form generation rate and number of leads acquired per day/month.
CrazyEgg, the company that offers website heatmaps to see where your clients are clicking, offers a great explanation on how to track the right KPI’s (example shown above).
If you are having a hard time finding the right KPI’s then try to write a description for what you are looking to increase. If you own an Affiliate website then selling more leads would be one of your key performance indicators, right? And the way you get more leads is through using a lead form. So, you could track your success by measuring the amount of people that complete a lead form per week or per month, and then find out the overall percentage of the total visitors you got that week or month. This will give you an accurate picture of the percentage of your visitors that you are converting into leads.
For Sale Managers tracking Lead Flow, to determine how many qualified leads are actually getting to you is the first step in any potential assessment of your KPIs. When facing a slowdown in sales, your first step is to inspect the volume of the leads not the number of sales people.
After checking the quantity, let's get down to the quality. Defining, assessing and inspecting the number of Qualified Opportunities gives all Sales Manager a better perspective on how sales can be approached.
Then it's time to sit down and put your K.P.I -Conversion under the microscope. Check the rate over wider and shorter periods of time.
Finally depending on your type of business, you'll need to assess your revenue figures – inspecting all incoming clients, renewals and add-ons to existing customer deals if that is possible.
But why bother?
What KPIs allow you to track is your return on investment or ROI. Let’s say you break your cost down into time spent and resources employed, such as staff, facilities etc. If you are self-employed and work for yourself you still need to employ resources, time spent for example.
If you track the right key performance metrics, that directly correlate to your sales, then you will be able to offer an accurate snapshot of the business to your partners and investors. Tracking the right KPIs will also allow you to see if your business is on -course, and correct it if things are going as well as you’ve planned.