Find winning Key Performance Indicators for your business

Date: 15th August 2016

Just like a successful Olympic team, your business needs goals and ways of measuring those goals. If you’re the NZ Women’s Hockey Team your goal might be finishing in the top five at Rio 2016. If you’re a new cafe, you might be aiming for a 20% growth in income on the previous year.

Key performance indicators (KPIs) are useful measures to track your business progress against your goals. Your KPIs relate closely to your goals and, if you are going to track performance against goals, you need to be able to measure them.

Work on KPIs with your team

Not every business is the same and not every business owner wants the same things, so KPIs take many different forms.

It’s a good idea to develop ideas with your team. Start by developing your strategic plan together and working out your goals for the next year. Decide which factors will indicate most clearly how well the business is progressing towards meeting those goals.  You may want to track performance by individual department within your business, but try and keep it to six or fewer KPIs for the business overall.

Four KPI groups to improve your business

If you need help figuring out what to measure, start by looking at these four key measurement areas within your business that Xero recommends: efficiency, growth, health and resilence.

1. Efficiency

  • Reducing waste and making the most of your resources.
  • Finding ways to improve staff productivity.
  • Lowering inventory days on hand to reduce storage costs.

2. Growth

  • Increasing your sales, measured by gross and net revenue.
  • Improving wealth, measured by business equity.

3. Health

  • Balance debt and equity levels to the best proportions.
  • Balance stock quantity with trade payables to get the best performance.
  • Optimising trade terms to speed up receipts.

4. Resilience

  • Reducing credit risk by optimising debt levels.
  • Improving profitability to increase interest coverage.
  • Reducing financial risk by increasing equity-to-asset levels.

These are examples to help you come up with your own particular KPIs.

Need help?

If you know what your goals are but it’s not clear how you will measure them, get in touch about working out KPIs to suit your business.

Posted in: Alexandra, Latest News, Queenstown, Wanaka