What are KPIs – Is Your Data Tracking True Progress?
The explosion of “big data,” or data that covers every aspect of your life and business, has changed the way you might think about progress.
Because data represents the voice of your leads and future customers in your business process.
The problem is: data can be misrepresented, used incorrectly, or steer you in directions that aren’t representing your true progress.
What are KPIs?
A Key Performance Indicator is just a fancy term for tracking important numbers in your business.
In the marketing sense, I’ll typically refer to these as the “numbers before the decision points.”
In other senses, it’s important to think of them as the voice of your customer in your business process.
A great KPI can help you identify better markets, improve your marketing messaging, focus on the right activities, or correct problems in your efforts right away.
This is when data helps you make good decisions.
If this data is then used to improve process or efforts directly related to your customer, that’s when you have a winning formula.
It doesn’t work when it becomes about improving process for process’ sake or just to see the numbers move in one direction or another.
What are your most important numbers?
The traditional bottom line in business, small and large, comes down to two resources.
Time and Money.
Investing your time properly creates more money.
Using your money correctly can buy you more time in the shape of teammates, resources, technology, and automation.
Eventually your money should also be making you more money in the form of investment and improvement.
All businesses, from the very earliest stages, need systems that measure where your time is going and where money is coming in and going out.
Where you measure time:
- Your calendar.
- Your task list or project management system.
- Invoices from teammates, contractors, or employees.
Where you measure money:
- Profit and loss statements.
- Your bank account or monthly books.
- Sales reports.
At every level of business, your problem is that you need more time or you need more money.
This is the domain of the Key Performance Indicator.
What are KPIs designed to do?
They should identify what’s happening before you invest the time, how your time is returning value, whether you’ve got enough capital to grow or scale your business.
In fact, most great KPIs like most great marketing efforts, come from good questions.
Here are a few to get you started:
- Does spending your time on your business result in you feeling excited and inspired or stressed out?
- Do other people WANT to spend their time, customers and teammates both, involved with your business?
- What amount of time each day is invested in activities that directly relate to revenue THAT DAY? (Sales and Marketing)
- What amount of money from each sale is invested back into your revenue producing activities?
- How many leads must you collect in order to make a sale?
- How many people must see your marketing message or material before they become a qualified lead?
- What is each customer in your business worth?
- How do your current efforts (marketing, sales, fulfillment, and others) compare to your previous efforts?
Your KPIs must make sense for YOU and YOUR BUSINESS.
You’ll notice from the questions above that a lot of them result in a “standard” KPI that you’ve probably seen before. Things like:
- Cost of Acquiring a New Customer
- Lifetime Value of a Customer
- Value of Each Employee/Contractor
It’s more important to understand these things conceptually as they relate directly to you rather than reading more traditional corporate definitions of the terms.
Because in the end – how you measure your KPIs and whether you actually use the data consistently determine whether or not they’ll actually have an impact overall on what you do each day.
Creating a Double Bottom Line
It’s possible to have a high producing, high performing business that makes you completely miserable.
It’s also possible to do things in life that give you great purpose and fulfillment that don’t actually have a viable business model.
The double bottom line is where both of these things meet and your Key Performance Indicators actually become far more empowering.
The concept of a double bottom line is looking at how much good you do for each customer (shown in the form of revenue) compared to how doing that good impacts the rest of your life, community, or cause.
Just because a passion isn’t profitable doesn’t mean you SHOULDN’T do things that bring you great fulfillment.
So your performance in the traditional bottom line can have a great impact on your double bottom line (see examples like Bill Gates).
If you’re like most leaders, you seek the dream of having this double bottom line expressed daily, or as often as possible, in your business.
Your dream of having a business that’s both fulfilling to you and to your customer.
Your dream of doing something each day that has meaning.
To measure this, your system should go:
- Determine which of the questions listed above are the most important for your business right now.
- Your offers are directly tied to the good they do for your customer. This does good for livelihoods, communities, or causes.
- Key Performance Indicators then look at how consistent and effective you are in spreading your message.
- Your Results (sales) determine where you need to improve or scale.
Overall, Your KPIs Should Be:
- Unique to your business.
- Specific to your double bottom line.
- Something you WANT to look at regularly and improve.
- Relevant to your effectiveness.
Key metrics are something we’ll discuss often here at Explore Momentum because they are very important to your marketing campaigns – but it’s important to know where to start in thinking about them which will help you implement.
What are your answers to some of the questions above? Do you need some help getting clearer on those answers? Let us know below!