You may be thinking, Do KPIs mater? Absolutely, they are a big deal. If you are in business, you need to understand what is going on.

This week's episode is about measuring your performance, making judgements, and getting opinions. From the cradle to the grave we make judgements, we express opinions, we tell people what we think, we act, we behave from the cradle to the grave.

That does not stop when you run your business, does it matter what people say? Does it matter what their opinions are, how they behave, what their actions are. Should we care? Absolutely yes you should care. If you're in your business, whatever that business is, whatever shape or size your business is, to survive, thrive, and prosper, then it's absolutely critical that you get a gauge that you measure all those interactions with your suppliers, your employees, and more particularly your customers.

Why KPIs matter

Well, they matter for several reasons.

They are a framework to measure your businesses performance

• You become more accountable
• The truth is revealed about how your business performance
• KPIs help give you actionable ways to achieve your business goals
• Making judgments, adjustments and staying on track.

What KPIs?

It is said that you cannot manage what you cannot measure. You measure what is important for your business. Do not use measures for somebody else's business, but important for you.

Remember that every business is different, with a different shape and goal. Consider what is important for your business to succeed.

Typically, this could be gross margins by product or overall, cash flows, and efficiencies. However, do not just measure financial stuff. Take a balanced approach in your business and look at the entire ecosystem.

Customer and employee satisfaction are critical. Customer feedback and staff retention are 2 useful KPIs.

Pick four to six KPIs that matter help you reach your Northern star, your end goals.

How to use KPIs

The managing is just as important as the measuring. If you don’t do anything with the data, there’s no point having it. Once you have the information, you can act on it. Having the information enables you to drill down and learn more. Ask questions of the numbers, and decide based on it.

There are lots of different types of software out there to help you manage KPIs, but you might do just as well with a spreadsheet or your own Google dashboard.

Whatever kind of business you have – service, manufacturing, sales, solopreneur – KPIs matter.

What Next

Grab a coffee, make yourself comfortable, sit back and listen. If you want to join out business growth club then click the link to find out more.

I love doing this podcast and sharing my love of Numbers with you. Check out the link to subscribe and do not miss an episode. Help me spread that Number Love by downloading it, listening, and acting!

In This Episode

• Understanding what Key Performance Indicators, KPIs are
• Knowing what KPIs to use for your business
• Looking at how to use KPIs
• Developing your own Numbers confidence and decisions
• Take more control of your numbers to help make you money, survive and thrive

 Links

https://podcasts.apple.com/podcast/proactiveresolutionss-podcast/id1500471288

https://play.google.com/music/m/I3pvpztpjvjw6yrw2kctmtyckam?t=I_Hate_Numbers

https://open.spotify.com/show/5lKjqgbYaxnIAoTeK0zins

https://www.stitcher.com/podcast/proactiveresolutionss-podcast

https://tunein.com/podcasts/Business–Economics-Podcasts/I-Hate-Numbers-p1298505/

Get in touch with us to find out more about the Business Growth Club.  For more business and finance, news, advice and tips, don’t forget to watch our weekly broadcasts.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi, folks, and welcome to another weekly episode of I Hate Numbers, the show far from wanting you to hate numbers, want you to get closer to numbers, get more comfortable with them so your business can make more money, can survive, and thrive, and make the impact that you want it to. This week's episode is about measuring and making judgments and getting opinions. Now, in all of our lives, we make judgements. We cast opinions.

We tell people what we think. We act. We behave. From the cradle to the grave, it goes on all the time. We tell people what we think of particular restaurants. We tell people how they make us feel. That doesn't stop when you run your business. And does it matter what people say? Does it matter what their opinions are? How they behave? What their actions are?

Should we care? Absolutely, yes, you should care. If you are in your business, whatever that business is, whatever shape or size your business is to survive, thrive, and prosper, then it's absolutely critical that you get a gauge, that you measure all those interactions with your suppliers, your employees, and, more particularly, your customers.

All three are important, but anybody who interacts with your business, whether they're buying something, whether they're working for you, whether they're supplying something to your business, it's actually critical that you have what I call KPIs, key performance indicators. KPIs, or key performance indicators are just posh words for measures.

Now, it's not just about the measuring, which we're going to pick up later on in this podcast, but it's what you do with that insight, those measures that is just as critical. If you're in business, it's easy to assume that you want to make money, who doesn't, have an impact and thrive. So, you need to understand what's going on in your business and with your business.

There's an old adage and old management cliche that says you cannot manage what you can't measure, and the clue is in the name Key Performance Indicators. The focus word there is key. Measure what's important for your business. There's three themes I want to cover in this podcast. There's the why.

There's the what, and the how. The why refers to why KPIs matter in the first place. The what is talking about what KPIs you should use. What is it that you should be measuring? And lastly, we're going to wrap up with the how. How do you actually use KPIs and in terms of how do you know how many KPIs to actually look at?

Well, let's deal with the first part. Why do KPIs matter? Well, they matter for a number of reasons. One of the reasons they matter is because they make you accountable. They reveal the truth about how your business is performing, and they help you make the right decisions to actually improve it. They also give you actionable ways so you can achieve your overall business goals, your Northern Star, and based on what the KPIs are telling you, you can make a judgment,

adjustments even, and stay on track. Fundamentally, what those KPIs are doing, they're expressing opinions. They're helping you make judgements about how your business is performing. You're not leaving it purely to how your gut feeling is, even though gut feeling is really important. You've got some hard evidence

supporting the performance of your business. Measure your performance effectively enables you to become better and improve what you're doing. Your KPIs for your business could help you make adjustments and stay on track and heading towards the end goal, your end destination. That progression can help you get a competitive advantage and help you make strides in your business growth.

They enable you to analyze your performance over time, spotting trends, forecast for futures, and giving you valuable insights. If you measure the same KPIs over a period of time, then you can detect patterns in your numbers. You might be able to spot when a downturn is likely to happen, or the best time to run special offers. You'll be seeing,

apart from the accountability, apart from the insights it gives you, it comes back to one of our core objectives in your business, and that's to make money, and by making money, I mean making profit, generating cash. KPIs will lend themselves perfectly to achieving that objective. Having talked about the why, let's now talk about the what.

What is the KPIs that you should be measuring? Well, it comes back to begin with, about measuring what's important for your business. Not somebody else's business, but important for you. Every business is different. Every business has a different shape. Every business has their own goal. So, you need to take into account what's important for your business to succeed.

Let's give you a few samples. So, profitability would be a crucial measure of business success, whatever business you have. Cash flow would be an important consideration as well. So, having a KPI that gives you an insight to how your profits are, your gross margins by product overall, by the service that you're offering, looking at the money in the bank to monitor your cash flow is going to be key KPI.

Now, it's not just about the numbers and even though it's important, it's not just about money, but we've got to take a balanced approach in our business and look at the entire ecosystem. So, customers obviously are important to us. We want to have satisfied, important customers, so we need some KPIs that go by the customer experience then.

A good KPI to measure customer satisfaction is the retention. How long are we retaining customers for? What's their, what's called their lifetime value? So, if we look at the profitability that we're generating by a customer, by a group, then that gives us some indication of how much that customer values us.

There are things like feedback, surveys, questionnaires, interactions, reviews that customers leave us. Those are all KPIs. The key is to focus on a few, not to have loads of them. Also, remember the people that you're working with, your staff, your freelancers. They all matter. So, speed of delivery from a freelancer, staff retention, staff absenteeism are also great insights, great KPIs to give you some element of staff satisfaction.

Why does it matter? Well, recruiting new customers, recruiting new members of staff is much more expensive than actually retaining the good staff and the good customers that you do have. Focus is absolutely paramount here. So, it's not just about a plethora of KPIs, it's about having core key performance indicators.

The clue is in the word key. So, what's critical for your business from a supplier perspective, from a process perspective, from a customer-satisfaction perspective, from a financial perspective, and select one or two key KPIs around that. Now, I said at the beginning of the podcast, it's not just the what, what we're measuring.

It's the insights that it gives us. So, effectively if we don't actually do something with the information that it tells us. So, if customer retention is quite low, we're losing lots of customers, that should make us to want to dig deeper to find out why those customers aren't remaining loyal. If customers aren't spending as much as we would like them to be,

if that's a KPI that we're measuring, we can find out why. Is it an internal issue or is it something relating to the marketplace we're operating in? If we're measuring gross profit as a key KPI, then if we're not achieving those gross margins, it might tell us something about the product in terms of the level of waste, the quality of the materials.

It might tell us something about the selling price, but you've got to use the information and react to it accordingly. So, let's recap where we are. So far, we've talked about the importance of KPIs. We’ve talked about the why. We’ve talked about the what, and we've talked about what is what we do with that information that's going to be as key.

The last thing to talk about in this podcast is how we use those KPIs. Typically, we should be picking around about four to six KPIs that matter to us, help us get to our Northern Star, our end goals. How do we get this inside? Well, keep the spreadsheets and data updated at record intervals. Having a cloud system like Xero, any digital cloud accounting platform enables you to track that data and tells you what profit you're making now, not in a few-months time.

Consider doing surveys and questionnaires with your customers. Treat the results of those very carefully. If you've only got a very small sample size, it'll enable you to take the temperature of what's going on, but it may not be representative of what's occurring overall. Look at your website traffic, your social media traffic.

So, there's lots of information there, and we've discussed before, on podcast before, have a good, cohesive, robust management and financial system in place. Don't underestimate your own power of observations. Now, the targets you set yourself for your KPIs have got to be achievable, yet challenging, stretching you, your team to work harder and to achieve more.

They need to be flexible. They need to be adaptable. As you reach your end destination, a useful tip is to have what I call a KPI dashboard. Now, you can either do this on a sheet of paper or you can actually do it in a piece of software, and you identify the KPIs that are important to you. You set your targets for those KPIs, and you measure and monitor them on a regular basis.

Typically, once a month would be a good enough timeframe and visualise them, put them on your dashboard so you can see how your business is performing at any one time. Great snapshot of the overall health and direction of your business. Now, to recap, measuring is one aspect. The managing goes with that, and it's just as important if not more

so. Whatever your business shape, whether it's a service business, a manufacturing, a charity, a sales business, solepreneur, KPIs matter. KPIs matter because they'll help you get to your end destination, and make money. Well, folks, I hope you've enjoyed this podcast. Give me some feedback. Like, share, all those usual things here.

If you can look at the end of the podcast on the show notes there as well, there's some extra resources to help you guide you on your journey. Have a great week, folks. Ciao. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode.

We look forward to you joining us next week for another I Hate Numbers episode.