Regardless of how large your company is, you certainly have your own goals related to your business, right? To achieve these goals, specific activities are usually planned. These activities, in turn, either lead the company toward its objectives or not. Today, I want to tell you that throughout this entire journey—from setting the goal to reaching it or not—you NEED TO MEASURE, ANALYZE, and CORRECT. This is the most effective way to grow a business. And growth is always necessary. If you stand still in business, someone else will definitely get ahead of you.
As Peter Drucker said:
"What cannot be measured cannot be improved."
How does this work? Nowadays, the KPI (Key Performance Indicator) methodology is used for measurement. KPIs are selected metrics that make business performance visible and enable decision-makers to take necessary actions to achieve desired results.
Let’s imagine your goal is to increase the average purchase size by 15% so that it reaches 100 euros per customer.
What should we measure? First of all, of course, the average purchase size.
What could we use and measure to achieve this goal? Cross-sell products, monthly campaigns, and unbundled products.
How often should we measure? Some metrics are measured daily, but most often once a week or once a month—depending on the size of the business.
What should we compare against? Compare your data with last year’s or last month’s figures. You can also compare with competitors’ data. However, there are also benchmark numbers that help you understand whether you are on the right track or not.
There are many different metrics. I recommend choosing the most important ones based on your company's activities in each area and monitoring them consistently. Sometimes even five metrics are enough.
So: SET GOALS, CHOOSE METRICS, MONITOR THEM, AND ANALYZE. Based on your analysis, decide whether you’ve done everything correctly and continue or make improvements.
Below are examples of what is measured. From here, you can select suitable KPIs and start measuring.
**MARKETING:**
Number of potential clients per month, Conversion rate, Average cost per Lead, Time spent per Lead, Number of visitors (in-store, online store, website), Number of calls received, etc.
**SALES:**
Number of units sold, Sales revenue, Revenue per sales representative, Revenue by product group, Average purchase size, Cost per sale, Gross profit margin per sale, Time spent per sale, Share of new clients in total sales etc.
**CUSTOMER RELATIONSHIPS:**
Customer satisfaction index, Customer retention rate, Customer lifetime value (CLV), Number of referrals received, Number of complaints, Number of positive feedbacks from individuals, Repeat purchases from loyal customers etc.
**PRODUCTION:**
Inventory turnover ratio, Delivery accuracy (% of shipments with errors), Number of defective products/reports of errors in shipments), Production speed etc.
**SERVICES:**
Proportion of customer service work in total activities, Sales work proportion relative to expectations, Maximum available employee working hours, Employee turnover rate, Employee satisfaction index etc.
**OTHER IMPORTANT BUSINESS METRICS:**
Share of fixed costs in total costs; proportion of variable costs; Net profit; Most profitable product; Most time-consuming task; Largest expense; Overall solvency level; Accounts receivable collection period (days); Payment period for invoices (days); Cash flows; Income statement etc.
This is again a lot of practical and useful material—everything so you can create your own future and start today!
