Key Performance Indicators

Speaker 0: Welcome to Business in Broward, a new podcast for small business owners looking for practical advice and inspiration. We keep you up to date on business trends, what's coming in AI, and just practical business tips. So we appreciate you listening to this episode of Business in Broward. Well, key performance indicators are valuable metrics that can help your business drive growth, efficiency, and achieve excellence. Now there's a famous quote from hundreds of years ago, and it's from Galileo.

And he said, measure what is measurable, and make measurable what is not so. So in today's data driven world, the ability to measure and analyze performance is crucial to the success of any organization. So key performance indicators, KPIs, serve as the backbone of this process, offering a quantifiable means of assessing progress towards your strategic goals. Now you might think, for my business in Broward, I can track what I need on a spreadsheet. Well, KPIs are more than just numbers on a spreadsheet.

They're the lifeblood of a growing organization or business. And when you monitor these metrics, your business can spot trends, find new challenges you need to address proactively. You can optimize your business processes. Ultimately, you're gonna drive growth and profitability. That's what every business is about.

Right? The American dream, being profitable so that you can bless your family and others. Now I wanna talk about the art of selecting KPIs. Sometimes less is more. William Bruce Cameron once said, not everything that counts can be counted, and not everything that can be counted counts.

So the key to harnessing the power of key performance indicators lies in carefully selecting them. So choosing the right KPI, well, it's a delicate balance, Because you could end up focusing on too many metrics, and that can dilute the impact of what you're trying to the information you're trying to glean. So the goal of your business is to identify the most relevant KPIs. Now before you even get into thinking about key performance indicators, you've gotta have, for your business, strategic objectives. Because to identify the most relevant key performance indicators, you've gotta know your objectives because that is gonna serve as the foundation for selecting meaningful metrics, picking the right KPIs.

So your objectives should be SMART. That's an acronym. Specific, measurable, achievable, relevant, and time bound. And there are two more things they need to be, realistic and actionable. So when you have your strategic objectives, you can identify the key performance indicators that best align with these goals.

This is gonna be different but depending on your type of business. Right? But let me give you some common examples of of KPIs. So so revenue growth, a measure where you can measure the increase in your revenue over a specific period, which will let you know the effectiveness of your sales and marketing efforts. For example, if you see that you're up 14% in the last two quarters and you started a new marketing campaign during those two quarters, well, you know it's being effective.

Right? Another KPI, key performance indicator, is customer acquisition cost, the average cost of acquiring a new customer. This gives you insight into the efficiency of your marketing efforts. For example, let's say you spend a thousand dollars on a Facebook campaign and you get 10 new paying customers. Well, then your acquisition cost was a hundred dollars per customer.

Now if you're selling a $500 product, that's great. If you're selling a $10 product, that's really bad. You've lost money. So knowing your customer acquisition cost, this key performance indicator, very important for probably any business. Right?

Another one to look at is your employee turnover rate. If you're a larger business and remember, one way that the government actually defines small businesses is a business with 500 employees or less. For us, when I think of a small business, I think of, you know, maybe it's a mom and pop, maybe it's a husband and wife, maybe they have three employees, 10 employees. Kind of in my mind, you know, once you get above fifteen, twenty, 30 employees, there's a big difference. But, technically, that's still a small business.

Anything under several hundred people according to the government. So if you're super small, you're gonna kinda know the status of your employ employee turnover rate. But if you're a little bit larger, you do wanna know the rate at which your employees leave because that's gonna show you the effectiveness of your recruitment, your retention, your employee satisfaction. You see, if you have a great employee and you lose them, you've got to spend time and money to train the next person. And, of course, if you're a bigger business and this is happening in to dozens of people every year, they're leaving and you're having to retrain, then then you need to improve your employee loyalty, your employee satisfaction.

And now let's look at the the, customer version of that. And there's something called the net promoter score. That's a key performance indicator that measures, customer loyalty and satisfaction, lets you know the quality of their experience. Are they gonna promote you? Are they gonna tell their friends and family, oh, yeah.

Buy from them. I had a great experience. Or are they gonna say, don't ever buy from them. You want people promoting you, your own customers, word-of-mouth. So the true power of KPIs lie in their ability to align the efforts of your business towards your common goal.

And when you have a consistent set of KPIs that are shared and understood by you and everybody who works for you, then your business is going to have a culture of accountability. There's gonna be a sense of unity within the organization. You're all pointed towards the same goal, and everybody in the organization in your business is gonna say, hey. You know, maybe that person could be, you know, doing better. But when you choose your KPIs and you start measuring them and acting on them, you need to not keep the same ones forever and ever.

Two Two years down the road, five years down the road, you know, you have to constantly review and update what you're measuring. Because if your KPIs help you be better, they're gonna change you over time for the better. Then when you get to down the road a little bit, maybe you need to change those KPIs. You want to be continually improving. The process of continuous improvement is crucial to the long term success of any business.

It enables you to adapt and thrive in a crazy world that is constantly changing. With this AI stuff that's coming out, it is really going to give businesses that adopt it a competitive advantage, even very small businesses, even solopreneurs. So know your strategic objectives, and then carefully select, align, and monitor those using key performance indicators. It can help you unlock your business's full potential and drive sustainable growth.