How are you measuring your effectiveness? Are you focused on the right aspects of your business? If your business were to meet an emergency, would you even know where to focus?
It’s no secret that measuring your performance is crucial to 10X-ing your business. The best business leaders consistently use key performance indicators (KPIs) to measure the most important aspects of their operational strategy.
This means improved performance over time and, in periods of business or economic crisis, a reliable road map for stabilizing and even growing your business. The opportunity for growth is especially true if you’ve planned correctly by aligning your KPIs with the business’s goals. Many businesses we work with are distracted by vanity metrics without considering whether or not those metrics are getting you closer to goal achievement.
Don’t get distracted by vanity metrics
For instance, if email marketing is central to your business’s sales strategy, then you need to pay close attention to the specific actions of your end users. Having a high open rate sounds promising — and it is certainly a metric that has some merit — but if your email recipients aren’t clicking links, filling out forms, or taking the actions that will ultimately drive profitability, then having a high open rate doesn’t really amount to much.
In other words, you need to develop a KPI model, including a checklist and a regular cadence of reporting, that creates a picture of the general health of your business so that you can reliably measure and track progress, make changes in areas that are underperforming, stop expending energy and resources that are adding no value, and to avoid big losses when a crisis hits.
Make sure your KPIs are comprehensive
It is especially important to the long-term health and growth of your business to have different KPI checklists for each area of your company, such as sales, marketing, finance, customer service, and so on. Everyone on your team should understand how their roles and their contributions impact the business.
That’s why consistency is so important to this process. In the instance an emergency hits, you already have a data set that tells you where the business was and where it was headed before the crisis occurred, as well as what your most profitable departments are, where your top performers reside in the organization, and where you have the most flexibility to stay aligned with your long-term goals as you adapt to market fluctuations.
But remember: It’s about quality, not quantity
At Cardone Ventures, we recommend that you create a checklist of about four to ten KPIs total. Too few, and you’re missing out on key performance metrics that could give you a much-needed warning or be the gateway to extreme growth. Too many KPIs, and you’re giving your energy (a valuable, but finite resource) to things that aren’t going to push the business forward. In a time of business emergency, your KPI checklist is going to give you calm in the storm, and will help you prioritize your main revenue streams and play to your strengths.
Make your KPIs industry-specific
Your KPI model should correlate with your industry. If you’re a product-oriented business, then sales, marketing, manufacturing, and shipping are just a few of the areas you’d want to focus on. If you’re a service-based business, then your workforce and cash flow are two crucial areas to be watching. In an effort to give you an even clearer picture of how KPIs can differ by industry, as well as give you some insight into what your own KPIs could look like.
Suggested Healthcare KPIs
- Average wait time for patients
- Average cost per treatment
- New vs. Existing patients
- Cost per appointment
- Average time to process insurance claims
- Claim denial rate
Suggested Service-oriented KPIs
- Profit margin
- Revenue per employee
- Utilization rate
- Realization rate
- Retention rate
- Testimonials and referrals
Suggested Sales-oriented KPIs
- Bookings and appointments
- Calls converted to sales
- Customer acquisition cost
- Lead to conversion ratio
- Competitor pricing
- Average length of sales cycle
Suggested Manufacturing KPIs
- Throughput rate
- Production cost per unit
- Backorder rate
- Demand forecasting
- Return on assets
- Overtime rate
Of course, these are just a few examples of KPIs that pertain to these industries. Do your research, carefully consider the KPIs that best reflect your business and that best align with your long-term goals. Use them to create a checklist or dashboard where your team can provide you real-time information about the status of the business. I’ve seen this process time and time again transform the way that business owners look at their businesses. More importantly, I’ve seen strategic KPI tracking transform the way they act in regard to their businesses.
The right data at the right time is knowledge, and unemotional, data-driven knowledge is power, which is exactly what you’ll need when the business is going through a period of turbulence. Use this power to keep you focused and driving toward your goals.
Do you have a clear understanding of your business’s essential KPIs that will drive you to being a 10X business? If you’re ready to scale and grow, it’s time to work with Cardone Ventures. Contact Brandon Dawson to see how we can help you scale!