What are KPIs?
KPI stands for Key Performance Indicators and they are exactly what they say on the tin. They are key metrics of information which indicate how your business is performing.
KPIs should be used by business owners to regularly assess how their business is performing. KPIs don’t need to be complicated. In fact – the simpler the better. The key to success when using KPIs is carefully selecting the metrics that are most relevant to a specific company’s goals. What do you want to achieve? Increased turnover? New customers? More five-star reviews? Convert more quotes?
You could use information taken from your accounting data or other key metrics within your business. I would always only suggest having a handful of KPIs that you constantly measure tweak and report on because if you have too many they won’t get done and too few don’t really give you a feel for how the business is going.
It’s good to start with a metric that is easily measurable, you have the data to hand and you can calculate with ease on a periodic basis.
An example of KPIs that a plumbing and heating business could measure is gross profit %.
Gross profit % is calculated by:
Total net sales minus the total cost of sales = gross profit
Gross profit divided by sales x 100 = Gross profit %
