How KPIs (Key Performance Indicators) can give your company measurable goals to
The term "KPI" is commonly used in business meetings, but what does it mean? KPI
stands for Key Performance Indicator. Your KPI is a way to measure success or
You can use your KPI to identify areas of strength and weakness in your company
and then use that data to determine the necessary course of action. In this
article, we’ll show you why you need KPIs and how to start designing your own.
- Use KPIs to measure progress and discover if your company’s goals are
- As you get closer to your goals, adjust your KPIs so you get a more precise
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Why you need KPIs as part of your sales and business practice.
Your company cannot depend only on hard work to be successful. You need to be
measure the results of your goals, campaigns, and efforts. That’s why your Key
Performance Indicators matter. A properly set up KPI will allow you to
understand what is working and what needs to be improved.
Key Performance Indicators are measurable assessments that help you understand
how effectively your employees and teams are achieving the goals set by your
By breaking down goals into measurable and regular referenceable data points,
you’ll be better able to discover strengths and weaknesses, identify areas that
need improvement, and show quantifiable and verifiable information to management
If your company doesn’t establish your KPIs, you’ll find it challenging to track
progress, and you will not be able to make data-driven decisions.
Why do small and medium-sized businesses need KPIs?
Let’s examine some common problems that your company might be experiencing.
Businesses like yours need to measure their challenges and day-to-day
operations. Here’s how using KPIs can solve common challenges for your business.
- Failure to keep clients: It costs far more to find a new
client than to keep one. A KPI for your Customer Retention Rate will help
you understand the ratio of retained customers to lost ones. Use this
measurement to increase your client return ratio.
- Low Customer Satisfaction: When you have low customer
satisfaction, you’ll lose experienced customers and possible staff who can
quickly become disillusioned. A KPI called a Customer Satisfaction Score can
measure how satisfied your clients are with your services or goods. Be sure
to include customers in this KPI and hear their voices and frustrations.
- Lead Burn and churn: Every lead deserves a chance and costs
your company money and time. If your sales team is burning leads, you must
immediately know and improve the situation. A KPI called a Lead Conversion
Rate will let you understand how good (or bad) your sales team can convert
leads into customers.
- High Cost per Customer: Converting leads into customers is
great until it becomes cost-prohibitive. Using a KPI called a Customer
Acquisition Cost can let you know how much your company spends to find new
customers and leads and show areas where you can reduce costs.
- Low-Value Customers: Converting leads to customers is the
goal of every business, but if your customers aren’t spending enough, it’s a
losing proposition. A KPI called Average Revenue Per Customer can guide your
company on which customer sets are the most revenue-generating and which can
be guided to spend more. Maximize your revenue.
How you can make up your first KPI
If you don’t already use KPIs in your organization, you can follow these easy
steps to make your first one:
- Get SMART: Your KPIs must be Specific, Measurable,
Achievable, Relevant, and Time-bound.
- Assign it: Have a senior team leader take charge of the
- Research it: Find out what others are doing in your
industry so you have a baseline to go from, but find your own unique needs
- Define It: Define your company’s long and short-term
- Select it: Select what you want to occur. More sales,
higher value sales, less sales staff turnover, increased customer
- Match it: Make sure your KPIs align with goals at the
organizational and departmental levels.
- Move it: Data doesn’t do any good if you don’t know where
it will go. Ensure your information is correct, works in your plan, and gets
to the correct source.
- Track it: Keep detailed records and track changes over
time; establish weekly, if not daily, reports.
- Keep it: All your data should be kept in your CRM.
With these steps, your organization can begin to use KPIs.
How KPIs work with your CRM
After formulating your KPIs, you can use the data from your CRM
to track the
performance of your marketing campaigns and customer interactions, identify
areas of improvement, discover weaknesses, and more. A KPI is a standard
measurement that is a “same-truth” company-wide, allowing all team members to
get the same unbiased view.
What is a KPI in business?
A business's KPI (Key Performance Indicator) is simply a measurement of a single
or multiple performance of financial, strategic, or operational goals. You’ll
use this measurement to gauge your business objectives' success over time.
KPIs can be about customer performance, lead usage, profitability, revenue, or
other essential measurements that business leaders need to understand.
Some more good KPI examples
Here are a few examples of common KPIs that your company should consider.
- Sales Growth: Sales growth is defined as the percentage of
increased sales during a particular period. Your company will not clearly
understand patterns and
trends without measuring sales growth. Having a consistent rise in sales
means your business is doing everything right. Other versions of this KPI
include “Year-To-Date” sales growth and “Lead Conversion Ratio.”
- Closing Ratio: In addition to overall sales growth, you’ll
many leads you close compared to how many you can create or purchase.
is called a “Closing Ratio.”
- Year-to-date: This KPI measures the rate of increase for
or it can
be adjusted for smaller amounts of time.
- Sales Per Rep: This KPI answers how many sales each
per month or year, which can also be used for entire divisions or
departments. This can help sales trainers or your sales enablement
give attention to reps. Who aren't performing as well
as their peers, and learn from reps who exceed averages.
- Win Rate: Understanding how many deals close out of all the
a critical measure that this KPI can show.
- Customer Acquisition Cost (CAC): This KPI shows the average
cost of getting a new customer. If your CAC is too high, this can lead to
negative profitability and cash flow problems.
- Customer Lifetime Value (CLV): The total amount, on
average, that a customer will spend with your company is measured by the
CLV. A low value for this shows poor alignment with goals, a failure to
upsell or cross-sell products, or low customer retention rates.
- Website Traffic: Your website traffic should increase,
primarily if you practice content marketing. This KPI can show you how well
or poorly your online marketing strategies are doing.
- Social Media Engagement: This KPI measures how much
engagement your social media is getting and whether your campaigns have
- Customer Churn: When customers stop doing business with
you, this is called “Churn,” this KPI measures the number of customers
stop doing business with you. A lower rate means clients are happy with
- Customer satisfaction score (CSAT): Unhappy clients
you’ll have to spend a lot more to get new clients, and you may get
word-of-mouth reviews. A higher score means you are doing well.
- Net promoter score (NPS): You can measure how likely
customers are to recommend your business to their friends or associates.
a survey, your clients are asked just one question, “How likely are you
recommend our company on a scale of 1-10?” Those with the highest scores
promoters, while those with lower scores are detractors. The NPS is
from the percentage of detractors from those of the promoters.
- Gross Profit Margin: Low gross profit margins indicate
your product or service is priced incorrectly or that it is costing your
company too much to produce or provide. This KPI measures the percentage
revenue after deducting the costs to produce goods or services.
- Return on Investment (ROI): This KPI measures how much
spend compared to how much you make from those investments. This should
front and center for every company.
Key Performance Indicators (KPIs) are essential in measuring business
objectives, discovering strong points and areas that need improvement,
evaluating overall company health, and communicating performance to
and decision-makers. Small and medium-sized businesses (SMBs) can avoid poor
decision-making, misused resources, lack of direction, and focus by