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Key performance indicators (KPIs) are essential for company operations, as the name implies. They show where success is occurring and where improvements might be made.
Also, they help you to track your competitors, so you know how to react during every shift in the industry. Small businesses, in particular, need to track KPIs to stay competitive. A lot of factors are against them, such as lack of funding, insufficient knowledge, and disorganization.
When businesses measure KPIs, the many benefits outweigh the negatives. Tracking certain metrics will drive your operating model, clarify key performance expectations, and lead to better management.
In the long run, KPIs are a major advantage for growing your company and getting out of the small business paradigm. It’s worthwhile for every department to learn which KPIs to measure. There are hundreds you could track, but here are a few of the most essential.
1. Cash Flow
Watching the forecasts for your cash flow let your firm know whether sales and margins are in the right place. It’s a smart move to perform cash flow forecasts regularly and make adjustments when necessary. If you spot problems with your financial planning early on, you can avoid a major catastrophe down the road.
2. Profit Margins
Profits in their raw state can be deceiving. It might look like you’re making a lot of money, but when you compare it to the cost of production, labor, and other overhead, you might discover you’re not doing nearly as well as you believed.
A good profit margin emerges when the price customers pay balances with the price you pay your suppliers. If your margins aren’t putting you in the green, your financial position is suffering.
In order to correct a bad profit margin, figure out how to reduce your overhead and move some parts around to lessen some of the financial burden.
Obviously, if you want your profits and cash flow to grow, you’ll need more customer leads. Leads drive your marketing and sales departments forward, and present opportunities for future growth. When you’re overlooking consistent leads for your business, growth can stall.
Focus on your sales pipeline to maximize leads. You might look into getting a customer relationship management (CRM) system to smooth the process, and when you notice discrepancies, make the necessary adjustments to boost your leads and get more customers interested in your operations.
4. Sales Growth
The best way to measure the success of your marketing efforts by far is to track your sales growth. This can be challenging to assess, since your sales growth can be more like sales atrophy at times, but it’s invaluable to do so.
When your sales dip, you’ll need to adjust your strategy in order to reverse the cycle. Learn from the mistakes you’ve observed in your data and propel the positive elements forward. You’ll be able to identify growth trends as a result.
5. Website Traffic
Note the discrepancy between website visitors and conversions. How many of your visitors become customers?
If you have a high bounce rate, why aren’t people interested in sticking around? If they don’t purchase something on your website, was it at least a quality visit?
Raising the success rate of your website traffic will help you focus on improvements that will bring in not only more traffic, but conversions.
6. Social Media
These days, most companies combine social media marketing with their traditional advertising strategies. Assuming you do, you’ll want to pay attention to reach and engagement.
By tracking the arc of your followers, likes, retweets, and other social signals, you can gauge the kind of traffic associated with conversations that connect with your brand.
Keep in mind, though, that not all social media is good for your business. Monitor social signals carefully to see what helps and what could use some adjustment.
7. Email Marketing
Email marketing is another useful way to connect with your customers, but it can be counterproductive to send out emails without making sure they’re effective. Email marketing campaigns should be well analyzed and, if necessary, revamped to get your message across.
Some of the KPIs within your email marketing strategy include:
- Delivery rate
- Open rate
- Unsubscribe rate
- Conversion rate
- Click-through rate
The seven items discussed above are just a few of the many metrics that small businesses can and should be measuring. It’s easy to let these things go, but companies that put their performance metrics first typically see significant improvements that empower their business to grow.