Every business plan includes a Financial section. Within this section, you will break down your KPI’s. If you don’t know what I’m talking about just yet, stick with me! We’re going to dive right in and discuss what KPI’s are, how to develop them, and which ones are good for your business.
KPI stands for Key Performance Indicator. In simple terms, it’s a metric that helps companies determine the effectiveness of current business incentives. Not every metric is going to be a KPI and that’s important to remember. The purpose of a KPI is to evaluate success at reaching targets. There are going to be High KPI’s, which monitor the overall performance of your enterprise and Low KPI’s which will break down different departments such as sales or marketing.
The action behind a KPI is what motivates and drives the results. That is what makes the KPI effective and valuable. It’s important to develop KPI’s that work for the individual needs of your company and relevant to where you are and where you want to go, and not just following industry standards. For the purpose of this discussion, we will stick to general KPI’s, though.
Much like the business plan, your KPI’s are a form of communication. They tell you where your opportunities lie and where you’re really succeeding. Much like the business plan, they can act as a road map for your business. When you are developing your KPI’s, stick to the basics. You have to gather information in order to gain information. Much like the saying goes, ” you must know where you’ve been in order to know where you’re going”- or something like that 😉 You will want to state clear objectives, how you’re going to achieve these objectives, and who is going to be held accountable for the results.
Time frame in which this KPI will be measured
When defining KPI’s ask yourself:
What is your desired outcome?
Why is it relevant?
Who is responsible for the outcome?
-will you measure the KPI?
-can you drive action behind it?
-will you know when you’ve reached your target?
-often will you measure progress?
Example: Monitoring Sales Growth
-Objective is to increase annual sales revenue by 15%
-Increasing the annual revenue by 15% will ensure that the business is profitable and in the green.
-All of management and the entire sales team is responsible for contributing to the growth of our annual sales.
-We will monitor the dollar amount spent by each customer.
-We will ensure that we have the sales floor to maximum capacity of stock at all times and have a knowledgable and trained, professional selling staff.
-When we have seen at increase in our annual revenue of 15% is when we will know we have reached our target goal for sales growth.
-we will review this KPI weekly.
As a retailer, your Sales Growth is going to be a constant KPI. It is one that is quite simple to track and easy to break down into smaller goals in order to delegate to your sales staff. which brings me to one thing I want to touch on. The “Who” in all of this…The “Who” is really everybody. Your KPI’s should be completely transparent across the board. A good leader will recognize the action behind the results starts with their team being in the know and will make sure that everyone knows what goals you should be working towards and are currently monitoring. Being transparent with your team and sharing your KPI goals and current stats will motivate them to work harder. It will show them that not only do they matter to you as their leader, but that the work they do also matters and really makes a difference in the overall success of the business.
There are all kinds of KPI’s. As a whole business, there will be Marketing KPI’s, Social Media KPI’s, SEO metrics, etc… pertaining to you as a retailer, there are some specific ones that you’ll want to have on your radar as you set up this portion of your plan.
We are in the business of moving product and retaining customers. you will want to pay attention to the following:
–Customer Information Capture Rate: How many customers contact information can you obtain? How will you be able to talk to them once they leave your store? How are you going to get them to come back?
–Customer Satisfaction: How was their overall experience? What did they like or dislike about shopping your store?
–Cost of Goods Sold: COGS. The profit margin on your product vs analyzing how the cost of labor and shipping effect your profit margins. This is where you determine the mark up of your prices.
–Increment Sale: The amount of sales that derived from marketing or promotional activities.
–Purchase Value: You can break this KPI down into lower KPI’s such as UPT, units per transaction. or DPT, dollar per transaction. Your Conversion rate, the percentage of how many people walk into your store vs the amount of people that actually purchase.
This is just a few of the KPI’s that are relevant to running a successful and profitable business. Should you decide to take on High Tide Writing Services. We can provide full KPI analysis of your business and create an action plan to maintain and increase areas in which you are stable and a plan of attack for the areas that leave you susceptible to opportunity and weakness.
Thanks for reading along and Happy Planning!