Which KPIs are for you? How to know if what you’re doing in your business is working?
Description:
Welcome to Episode 9 of the Future-Proof Your Business podcast.
Today's episode is all about Key Performance Indicators and how to know if what you are doing in your business is working or not. I’m sharing with you some key insights and examples to help you to get under the skin of your business, to know what you should be tracking and monitoring and to be able to make informed decisions as you build and grow a business that works and feels good for you.
I take you through five key steps:
What are KPIs?
Why KPIs are important for your business
The different kinds of KPIs that you might use in your business.
Which KPIs you should be setting in your business.
How to create your own dashboard and review system for your business.
I have also included in the show notes some extra resources to help you work through these different steps and a template that you can use within your own business to monitor and track your own KPI.
Here are the highlights from this episode:
(05:26) What is a Key Performance Indicator?
(10:36) The four types of KPIs that you can have
(16:12) What are Leading KPIs and how can you use them to drive your business?
(20:37) What are the KPI’s that you should be setting in your business?
(26:33) Getting clear on the timeframe and the monitoring period.
(32:56) What are some of the things you should be looking at?
(37:50) How do you know if you are a business?
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I'm Lucy Rennie, and welcome to my Future Proof your Business Podcast.
The podcast that provides you with everything you need to know to build solid foundations and ultimately Future Proof your business.
I'm on a mission to share my love for small business with you and help you to enjoy the extraordinary ripple effect that comes through harnessing the power of people and relationships.
And I want to make sure that you can reap the benefits of being a business and a brand that people know, like and trust.
I'm a huge champion for small business and a massive believer in the fact that people do business with people.
This podcast is here to inspire you, encourage you and support you on this roller coaster ride that is building, growing and Future Proofing your business.
Hi, and welcome to episode nine of the Future-Proof your Business podcast. And in this episode, I'm going to be talking to you all about developing and creating your own KPI dashboard.
And when you hear that, when you hear me mention KPIs, you're going to be either groaning and moaning, and you're tummy is flipping because you're thinking, oh, gosh, she's going to talk to me about the numbers and about targets and about tracking all these different things and measuring what I'm doing.
Or you might be for the other camp, which is, oh, yes, I love knowing all about the data and all the things that are working within my business.
And you tend to normally fall into one of two camps. That's what happens when I'm with my clients, you either love numbers, and you love measuring and understanding what they can do to help you, or you find it maybe scary, or even maybe a little bit boring, and you don't want to have to go through the motions of tracking all these different things.
So what I wanted to do was, I suppose, really share with you a little bit about why it's really important to have KPIs in your business. And also, I want to really encourage you to think about what you're doing in your business. And, you know, if we want to future-proof our business, if we want to build something successful, that works, and that feels good, then we kind of need to know if what we're doing is working and if we're going in the right direction.
Okay, so in today's episode, I'm going to share with you some key information in and around KPIs. I recently ran a session on this in my membership, The Future-Proof Club™. We did a whole live workshop about setting KPIs and creating a dashboard and really getting under the skin of your business. And if I'm really honest, it blew my mind the results and the impact that that workshop had on the different business owners and members within the group.
For me, having come from, you know, working 15/20 years in the corporate industry, that was what we did. We lived by our KPIs, we lived by setting goals and targets and tracking what we did. And that's really how we were measured on our performance, whether we were actually delivering or not. And that was also the way that we could decide whether something was working, whether we needed to continue with it, or whether actually we would maybe change course, and do something differently. So for me when I realised that a lot of small business owners maybe shy away from doing this, or maybe they're not really clear on the impact, and the advantage that having clear KPIs can have on your business, I thought I'd share this with you today to really encourage you to move forward and set them for your business. I want to encourage you to have a really good think about it, especially at this time, when we are going into maybe more rocky or unsettling or uncertain times. I think it's even more essential that we are really clear on what we're trying to achieve and what direction we're going in. And then being able to track it to see whether actually what we're doing is working or not. Because, you know, we haven't got time as business owners to mess about or to be doing things that aren't delivering and getting us the results that we're looking for.
So, with all that in mind, I'm going to take you through five key steps today.
I'm going to talk to you about what a KPI is in the first place, then I'm going to talk about why you need to have KPIs, then we'll talk about the different kinds of KPIs that you can have, that you can set in your business. And I'm just going to keep it short and simple. And then I'm going to take you through an exercise where you can really think about which KPIs you should be setting in your business. And then finally, I will give you some pointers as to how to create your own dashboard and review system for your business. And I will also include in the show notes, some extra resources on this, so a handout that will take you through these different steps because some of it is quite visual and you need to be able to see that, but also a template for you to use, that you can use within your business to monitor and track your own KPIs that you define at the end of this podcast. Okay?
So I want you to keep an open mind, I want you to come at this with a view to really getting under the skin of your own business and using it to help you to set the direction and to be able to move forward in the right way. Okay?
So what is a KPI? It's basically a metric that we can use to track and measure your progress towards a goal or an objective. So towards the goal that you've set in your business. Okay, it's a quantifiable measure of performance over time, for a specific object. So it's when we've set a target or a goal, it's a way of tangibly understanding whether we're moving towards that goal well, whether we've hit that goal or whether, you know, maybe, actually, something's gone wrong, and we haven't, so it's being able to really monitor that. And ultimately, what it is, it's a way to really understand your business better to get under the skin of your business, and to really understand what's working, what's not working, and where we need to move forward. And you know, what I'm like, I like to bring in external elements to this. And I think a great definition from an organisation that sums this up really clearly is Masterclass. So I'm just going to read to you how they define what a KPI or key performance indicator is. And I think it's really important and a great way to sum this up. Okay, so
“key performance indicators are quantifiable goals intended to measure the scope or potential of a company's success, or attainable business objectives. These performance measurements can help indicate which components of your business are the most beneficial to its progress, which ones can help optimise its performance, or which areas of your company may need work”.
Okay. So what this is trying to say is basically, by getting really clear on where we want to go, and understanding what the drivers are, okay, what the levers are to achieving those objectives, then by monitoring them and really understanding them, we can know whether it's working and whether it's beneficial, and whether it's delivering. By being aware of what's happening and understanding these metrics, we can see whether maybe we need to tweak something or whether actually we need to do something different to be able to optimise its performance. And then finally, it's also a way of highlighting and bringing awareness to something that maybe isn't working, or maybe that does need extra work, or maybe something that actually, we just need to stop doing, because it's not actually developed or delivering in the way that we thought it was going to be. So it's really important that we start with understanding where we want to be, it's that direction.
And I know I have some clients who say to me, but I'm quite happy living in the present, I'm quite happy to kind of be in the day to day and enjoy what I'm doing, I find it really hard to set goals and define where I want to be. It's really important for me to say that these goals don't have to be hairy, scary, or they don't have to be kind of visionary and all these things. It might just be that the goal is to be in the same position, this time next year, to be able to provide for yourself, for your family, for your employees, for your team, it might be to maintain quality levels to deliver to your customers and to do a good job.
It doesn't have to be, which a lot of these gurus and all these kind of business textbooks tell us, in terms of having to scale and constantly grow and get bigger. This is about building a business. And this is what I'm all about building a business that works for you and feels really good. And there's no right or wrong with this, only you can decide what that is. So taking some time out to really understand what those goals are is going to really help you.
Okay, so why is it really important to have KPIs in your business. And as the great Tony Robbins says, “where focus goes, energy flows”, And his quote, really is saying, to get what you really want in life, you need a clear goal that has purpose and meaning behind it. And once this is in place, you can focus your energy on the goal and become obsessive about it. And what he's really saying is, let's get really clear on where it is that we want to be. And then let's focus on what are those key drivers that are going to help us to get there, what's going to have the biggest impact. Okay, so, as a small business owner, when you're spinning all those different plates and you're juggling all those different balls and you're firefighting all the time, it can be really overwhelming and it can be distracting having to deal with all those things. And sometimes what can happen is, we forget to concentrate on the most important things because we're juggling all those different balls. So having some really strong KPIs is a really, really good way to first of all know if you're on track, to keep focused on the right metrics, but also then to be able to make informed decisions. So if you know, for example, that your goal over the next three months is to really focus on delivering high quality goods or services to your customers to ensure that they come back, and that they're satisfied, and that maybe they share with their friends and family all about your business. So maybe the simple goal is just maintaining quality and maintaining your current status quo, that then will help you if some opportunity comes along, or someone asks you to do something or another project comes up, or if you're like me, and you have that shiny, new object syndrome. Because you've got really clear on where you're going and what you need to do, you can make an informed decision that says actually, no, you know what, that's not the right time to do this, I'm going to keep focused on what I should be doing and what I've decided are the key KPIs. For me, it's also a really great way, if you have a team, whether that's an in-house team, or whether it's a team of maybe freelancers, or key partners that work for you, it's a really great way to keep everyone aligned. And it's exactly the same, you know, if you're a football coach, or you're an Olympic team, or whatever it might be, if you're working with a lot of people, and you need to make sure that everybody's going in the same direction, then having really clear KPIs that really demonstrate and communicate where you're going to go and how you're going to measure that, is a brilliant way of keeping everyone aligned.
And then finally, the last reason why I believe you should have KPIs in your business is, it's a great way to help you to feel more in control. Because if you know where you're going, and you can track progress, and you can really understand the data and what it's telling you, then you can really feel much more in control of where you're going and what you're doing. It kind of takes away that shooting from the hip feeling or that panic when you're thinking, Oh God, what do I need to do next? Or is this working? Or isn't it working, you've got real data that's going to tell you and allow you to make those decisions and either move forward or tweak things or change things.
Okay, so there's definitely a whole batch of reasons why I really believe it's important to have KPIs in your business.
What are the types of KPIs that you can have?
If you go and research this, there's probably hundreds of different KPIs that you could think about and apply in your business, but for the sake of keeping things simple, for the sake of really allowing you to start to embrace this idea and to also just to take away that overwhelm. I'm just going to take you through the four main types of KPI.
So the first one is a quantitative KPI.
And this is where we have a measurable characteristic. Okay, so this is where it's pretty much black and white, and it usually involves numbers. There's no question about it, there's no sort of grey scale, it's either yes or no, or it's five, or it's 10, or whatever that might be. Okay. So that could be if you set a goal for the number of sales that you want to make each month, if you've said you want to make 100 sales, and you actually in reality only make 50 then that's a measurable characteristic. And we can see the result of that clearly, there's no discrepancy or anything in that.
The second kind of KPI that we can have is a qualitative KPI. And this is a bit more, it's a kind of a descriptive characteristic. So this is a little bit more opinion, sort of the grey scale, okay, so this is where it might be an opinion, it might be a trait. So it might be things like, if you're trying to track customer satisfaction, or you're trying to track how somebody received your product, or how they rate your quality or service, or how they rate the experience, or what they think about a particular topic, then that's going to be qualitative because it's going to depend on the person that you're asking. And it might also depend on other circumstances within the wider context that we need to just be aware of as we're tracking that data. But just because it isn't specific, kind of black and white doesn't mean that it's not valuable. It just means that we need to come at it from a different angle.
And then I want to talk to you now about two other types of KPIs which I think was part of what happened last week in the workshop where people were thinking, wow, not really done this kind of thing before. So this is where we talk about leading KPIs and lagging KPIs.
Now typically, if you are a business owner and you work with a traditional accountant, then you will be used to tracking and looking at lagging KPIs. And this is where you're measuring what's already happened. So I speak with lots of my clients, and they tell me their accountant has come, they created the year end accounts, and they've looked back, and they've told me, yeah, I did great here, not so well, here, I hit this target, but not this target. And, this is the result for the year.
It's basically looking back over a period of time and telling us what's happened. And I'm not saying it hasn't got value here, but we just need to be aware of the fact that actually, you know, it's not helping us to move forward, it's really kind of looking back over what's just happened. But it can be really useful if we're thinking about comparing current performance with past performance. So it might be that being able to have that previous historic data allows us to benchmark on our sales this month, compared to this time last year, or it might be our profit margin for the whole of the year, last year, so we can see whether we're improving on that or not, etc. So it's still absolutely, really valuable and useful. But I believe that it shouldn't be standalone, that we actually need to use it when we start to look at our leading KPIs. And these are the KPIs that I believe are incredibly important, and can really switch up the way that you manage your business, how you drive your business, and that ultimately, you future-proof your business. Leading KPIs are basically KPIs that help you to predict the outcome, and where you're likely to get to it, taking into account our goals. So let's say that this time next year, we want to have smashed it and just this I'm going to say, let's make a million pounds from cakes, it's easy numbers to think about.
So let's say by the end of September next year, our goal is to hit a million pounds in sales turnover. So what we can do with leading KPIs is then we can say,if that's where I want to be, then how am I going to get there? What are the KPIs or the targets that I can break down and monitor from now until then that are going to allow me to drive the business forward?
So this is where we might reverse engineer it and break that down as a basic metric. We could divide a million pounds by 12 and this will give us our monthly target. Or we might say, well, actually based on our lagging KPI, so based on past performance, I know that actually over Christmas and January, I didn't make any sales. So actually, I know that when I'm predicting my leading KPIs, I'm going to take that into account and add lower targets than maybe the other months, so it’s more realistic. So I know, actually, those months, I'm not going to put too much energy in there because I know, it's not the right time to be selling. But I'm going to ramp it up as the curve grows in March, April, or May, because I know that that's the most popular time to sell my product or service.
So these leading KPIs are really what I believe are the most important and transformative in your business.
How can we know where we're going and, and if we're doing okay, and if we're on target if we don't actually know what that target looks like? So it's really important. And this is the thing that as I say, we were talking about last week, and most of the people in the group had had all these different KPIs, but never really projected forward. So they were tracking what they were doing, but hadn't really got a view of where they wanted to be. And that's what's really important. And just a side note, on setting these goals, some of the things that came out of this were actually people's emotions, because I think sometimes we can kind of get a bit lost in setting these objectives. And you know what, I could probably create a whole podcast episode just on setting our objectives for the year, which maybe we'll do in a few weeks time. But actually, it can really come from your purpose, it can come from inside, it can come from personal goals. So some of the things that came out were about one of my clients who wanted to buy a new house, or wanted to buy a holiday house or wanted to create some funding to be able to help other less wealthy people or I think one of them was about helping schoolchildren to kind of be inspired about their careers and things like that.
So it doesn't have to be all the time about creating more money. Like I said, this can be about knowing well, actually, if I want to buy a holiday house, what do I need to be able to do that? Or if I want to be able to provide for my family, without worrying about it every night, or if I want to be able to support the local schoolchildren in their careers, education, what kind of things am I going to need to be able to do that? so that might be monetary, but it also might be time and resources. Or it might be connections and bringing in other business owners or entrepreneurs to help with that.
Setting those goals is really important to make sure that they really are goals that we believe in, and that we really want. And that we really, you know, this is why we're doing what we're doing. And we've talked about that in previous episodes, it's about making this really personal.
So with that in mind, what are the KPIs that we should be setting in our business? And what does that look like? if for the sake of argument today, if we're talking about future-proofing our business and creating something that’s sustainable, that works and feels good to you, then there are sort of five key areas that we probably should be looking at within our business to make sure that we're moving forward in the right way, and that we're going to be hitting those bigger goals that I've just talked about.
So the first one is about customer satisfaction. As you know, I'm a great believer in the fact that, if we're running a business, then the first thing that we should be doing is to make sure we do whatever we're doing in the right way, and that we should be delivering on our products and service, managing those expectations, and making sure that we are doing what we say we're going to do.
So by tracking customer satisfaction, we're able to make sure and monitor whether we are doing a good job, whether our customers are happy with what we're doing and whether we're moving in the right direction.
The second one is obviously financial. And this could be things like tracking your sales goals, it could be tracking the profit that you’re making. So, you know, I can't remember what the expression is. And I'm not going to try and say it because I'm rubbish at expressions. But I know that a lot of people, a lot of business owners as they're starting out, they can be very flashy about their turnover, and it becomes almost a vanity thing that you might have turned over this amount of money. But actually that means nothing if you haven't actually made any profit from that. So it's really important to be able to track and understand the numbers that you should be tracking. In particular, at this moment in time, I've been encouraging a lot of my clients to really make sure that they are getting their pricing right, that they're benchmarking and making sure that they are making the right kind of profit on each of their products and services. But also, another key KPI that's linked to finance is making sure you've got enough cash in the bank to keep yourself afloat. And that's one of the things they say, cash is king, don't they, because that's the one thing that you know, if you haven't got any of that, that's when things happen, and you know, the shit hits the fan. So financial goals are really important. And understanding what those KPIs and what you should be tracking are really key.
The third one is all about operations. And I think this is kind of getting under the skin of this and really understanding how your business operate, whether you've got a team or whether you haven't, whether it's online, whether it's face to face, or brick and mortar, what are the things that need to happen within your business to make sure that you're delivering the right quality of products and service on time and managing those expectations? So this is systems, its processes, it's checking that you're being as productive as you can be, that you’re making efficient use of your time and resources. Okay, so these are things that actually will, if you can tweak them and get them streamlined and really working well, will then have a massive impact on customer satisfaction, but also on your financials.
The fourth one is all about marketing, and how you're promoting your business. And we'll look at this later. But there's a vast number of different KPIs that you can think about. But ultimately, it's about getting clear on why you're doing that.
So for me, the best way of marketing is to word of mouth, and it's about connecting and getting out there. But then obviously, there's all sorts of different things that we need to be doing to make sure that people are aware of our business and our products and services, so that we can keep that pipeline coming.
And then finally, the fifth KPI that you should be setting in your business is sales. So it's making sure that you are selling, that you have an actual business that's, selling products and services and that you are doing that in the right kind of numbers to be able to move forward and make sure that it's sustainable.
So five key sets of KPIs, five key areas of the business that you should be looking after. Customer satisfaction, financial, operations, marketing and sales. Let’s look at how you should be defining those KPIs for your business, and there's five key steps on how to do this.
So the first one, which I've talked about already, is understanding what are your overall goals and objectives. So really getting clear on if that is being able to take every Friday off for your business, or if it's about having enough profit to be able to go and buy your holiday house or take your family on holiday. Or if it's about being the number one manufacturer in your industry, in the UK, for example, whatever those goals and objectives are, getting really clear on those, and then unpicking that and really defining the metrics that are going to help you to get there and the way that you're going to measure being able to do that.
So if it is becoming the number one manufacturer in the UK, I want you to think about what that actually means? How are you going to define that? Is that in terms of product sold? Is it in terms of market share? Is it in terms of reputation? Is it in terms of size of the cost of the business? So yeah, be really clear on what those metrics are and how you're going to define that. Okay, if it's about being able to buy your holiday house, then understanding what that looks like, how much is the holiday house going to cost? What's the cash or the lump sum that you need to do that? And then what's the timeline that you're going to need, you want to be able to make that kind of profit? So is it 12 months? And if so, what does that look like each month in terms of profit coming in?
I've just touched on that, then. But the third one is really getting clear on the timeframe and the monitoring period. And again, there's no right or wrong with this, depending on what your goal is, it might be now working towards the end of the year, and you're sort of thinking, right, okay, I want to smash Q4, because I want to really make sure that I've got a buffer, moving forward into 2023, to be able to kind of take the pressure off of you, with the recession and everything that's coming, you might be thinking, right, okay, my goal is frontloading, getting as much business in the next three months, or getting people to commit to working with me over the next 12 months. And I'm going to do that from now until the end of December. So that would be your specific timeframe. And that's what you're going to monitor. But again, I've worked in other businesses where we had a five year strategy or a 10 year strategy. And then we broke that down into quarterly KPIs or into annual KPIs. So it's really about understanding what's going to impact you, your goal, your objective, and getting really clear on that.
The fourth part is about sharing your goals and KPIs. And I really mean this in terms of helping you be accountable. So making sure you stay on track. So you might want to, if you have a team, if you have people that work with you, then you want to make sure that you're sharing your goals and your KPIs with them. So that like I said before, they can get really aligned on where they're going and help and support you and make sure that they're working and focusing on the right things.
Okay, so that's first of all in-house. But secondly, I think there's something really valuable and really powerful about sharing your goals and KPIs as a small business owner with the right kind of people. And I could talk about this all day, but having the right kind of people around you in the right community is so important. And you know, that's why I created The Future-Proof Club™, which is exactly that. So because it can be a lonely world, where you can't necessarily share everything with your team. But having that safe space where you can come in, you can share your goals, your dreams, but also the challenges and the sort of the ups and downs is really important. And I can see it, this is what happened last week in this workshop, it was kind of life changing for people to go actually, you know what, this is where I want to be, this is what my goal is. Sometimes sharing it openly can make it real, and can bring it to life and actually make it more doable, and almost more achievable.
And I've seen this this year with my book launch. I kind of put it out there at the beginning of the year that I was going to write a book and launch the book in October. And for me, the fact that I put it out there meant that there was no going back, I have now become accountable to you guys, but I was going to deliver and do this. So it really helped me on those rocky days or those wobbly days when I was thinking, why have I done this? Or what am I trying to do here or maybe I'll just give up. The fact that I had put it out there and shared it with you really helped me to keep going and to keep focused and move it forward. And again with my book, another example is I actually broke it down into key segments into chapters. So I knew that I had a timeline for that. And I knew that if I was going to get it done and get it published by October, I knew that these were the steps I needed to take and by when, so it was a really good opportunity for me to share those goals and KPIs. And finally, the last bit is, it's just pulling it all together and creating a toolkit for yourself to be able to process it and review and monitor those goals as you move forward and those KPIs.
So, I'm going to talk you through some key areas that you could be looking at when you're creating your own KPIs. But actually, what I want you to think about is identifying no more than five really important KPIs for your business. Okay, so I don't want you to get overwhelmed with this. And you can, because we think, you know, ultimately, we could add hundreds and hundreds of these. But I think the key element of this is really focusing on what's going to have the biggest impact. So last week, in the workshop, I was telling people, I wanted them to tell me the three main goals with the KPIs that they were going to be able to monitor and drive their business forward. And for you guys, it's exactly the same, I'm going to take you through again, the five key topics, I'm going to outline some of the things that you can be tracking within that. And then I want you to really kind of drill down into the one thing with each topic that's really going to make the most impact if you track it. And that's going to be completely dependent on your business and your products and services, and also your goals and where you want to go with this. And I will also share this dashboard and this outline in the show notes. So you can click on the link, and you'll be able to download it. And I'd love you to share it with me and let me know any thoughts on this or how you decided to identify your KPIs and what you're going to be tracking. So in terms of creating your own dashboard and review system, I always use a traffic light system, because I think I'm someone that works really well visually. So I like to see at an instance where I am with things, where somethings working, and it's going really well, or whether it actually needs a bit more work, or whether you know what, I'm completely off target. And this is where I need to put in the effort and the work and the focus. So I use a traffic light system, which means green is; it's all good. Amber is; it's maybe nearly there, but not quite, needs a bit of unpicking or a bit more focus. And then red is; where I'm off track. So creating that dashboard, where you've got your key KPIs down the left hand side, and then the traffic lights is really visual. And I think that's one of the things with KPIs is, I should be able to ask you at any time, how are you doing with your sales this month, or how are you doing in terms of your net profit, or whatever it is that you've decided for your KPIs. You should be able to tell me immediately without thinking about it, where you're up to, which is another reason why it's really important to just be tracking maybe three, four, or five and not hundreds. So just to finish, I'm going to take you through these five categories:
Customer satisfaction, you might be looking at lifetime value. So the amount somebody spends with your business and how often do they keep coming back? What are the other services or products that they are buying to increase that lifetime value? repeat customers, so are customers coming back, or do they just come in once and then go off into the sunset, customer feedback. So surveys, asking them how they found the service, those kinds of things, it might be tracking reviews, or referrals. So if you've decided that you want to really focus on word-of-mouth marketing, and you want to really encourage your customers to refer you in because you know, actually the time when they're most likely to buy from you is when they're already coming from a trusted source, then that's the KPI that you're going to pick under Customer Satisfaction.
Financials. So again, depending on what your objective is, and where you are in your business, you might want to look at net or gross profit, you might want to look at turnover, because maybe actually, this is about ramping up and getting it out there and getting in front and testing a product or making sure that you've got a viable business that people are buying from you.
It might be cash, because actually we're going into a recession. And you know, that actually, you need to have a certain amount of buffer to be able to survive the next few months if there is a downturn and a reduction in sales. So working out what that means in terms of buffer, is it six months that pays your salary and the team’s salary? Is it 12 months? Is it enough to be able to pay for your supplies, whatever that might be? That's how you determine your goal. And then you break it down into your KPIs. It might be receivables, so making sure that people are paying you on time and how can you really kind of investigate that and track that? So is it within 30 days, 90 days? Is it seven days? Is it paying up front? Whatever that might be, really understanding how that can impact your business. Or it might be inventory. So if you're a product business, then you're going to be thinking about inventory of stocks that you've got and what that means in terms of your business, in terms of finances, then money caught up in that stock. And that actually you could do with releasing, or is the value of that stock going to go down and all those things. So, again, you know, if you've got any questions on this, then please get in touch. But obviously, these are the kinds of things, especially financials that you should be looking at with your accountant or with your financial controllers, the people that can help you really understand what it is that you should be measuring in line with your goals.
In terms of operations, we talked about this before in terms of processes and things like that. So a few things that you could think of here are productivity, so how quickly? And how productive are you in terms of turning around your product or service? What's the quality level? What about the capacity to fulfil? So that's a really important one that quite a few of my clients are thinking about at the moment because maybe they're offering children's classes. So maybe it's performing arts or swimming classes? Or actually, maybe it's about implementing new CRM systems for businesses? It's all very well creating all these sales and bringing in all these different new customers, but have you got the capacity to fulfil those orders and maintain quality at the same time? So really understanding that is going to allow you to then know if you should be focusing on sales? Or actually, should you be focusing on bringing in more people or bringing in more resources to enable you to increase your capacity, which will then have a knock on effect on your sales? Or maybe if you are close to capacity, it's time to think about increasing prices, and increasing that net profit or that gross profit of things? So can you see how it's all interlinked, but actually really understanding what we want to be tracking and why, allows us to then make informed decisions? Again, this could be to do with processes? And can we automate things? Can we bring in a low cost resource to reduce the cost of certain things? Because we've been doing it over and over and because actually, it's a low cost activity? Can we look at maybe benchmarking the spend that we're having on our different resources or our different processes? Or can we think about working with the team to improve their productivity or those kinds of things, it might be health and safety. So it might be that you actually want to make sure that there's zero accidents in your organisation, because that's really important to you, and making sure that you're looking after your team, whether it's looking after your suppliers and the wider, wider community. So, you know, again, in my background, that has been a really, really vital and important focus and KPI, where we were really working hard to create that safety culture. So depending again, on, like we talked about in previous episodes, your vision and where you want to go, that might be high up on your list of KPIs and things to track. Another one could be team engagement. So thinking about making sure you know that you are a business that feels good, and that works well, not just for you, but also for the people that are working with you and making sure that, they are engaged and they are motivated, and they do come to work loving what they're doing. And there's ways that we can track this. So it might be absenteeism rate, employee turnover rates, or whether people are staying with you, or whether they're leaving quite quickly, etc. So that can have a massive impact then as well on productivity, I'm sorry, employee engagement on productivity or on quality or on repeat customers and customer service and satisfaction. So again, really understanding the synergies that are between all these different things is important.
Then we can talk about marketing. And again, this is something tha I'm really passionate about, and I could talk to you about it all day, we could probably do 10 episodes on this. But again, really understanding what we're trying to achieve is really important then to understand what we're trying to track. And I have clients even yesterday that say to me, oh, so my goal is to increase the number of enquiries. Well, that's great, but how are you going to measure that? Yeah, how are you actually going to know whether you've increased the number of enquiries or not? And it might be okay, you're going to compare it to last month? And you might say, okay, so I got one more enquiry than last month, I got 10 more. But actually, what's driving that? This is where we can have real leading KPIs that say, actually, if I want to hit my target and be able to buy that house, or provide for that community, or do that good thing with the kids at the school, I need to be making this number of sales. So in order to do that I need to be bringing in or encouraging at least 50 enquiries a month, or at least 10% increase on last month, so get really specific on what the outcome is and the result that you're looking for.
And not just making it woolly, I want to increase this or I want to increase awareness for my business. Okay, how are you going to know whether what you're doing is working or not? So this could be the number of leads, it could be the conversion rates or how many people actually buy. So that would help you to know whether those leads are good quality ones, whether they're the right kind of people, or actually, is it just people that are filling in forms and getting in touch, but actually, you know, really, they're not your ideal client, and they're not going to buy from you.
It could be things like cost per acquisition, it could be open rates, it could be engagement on social media. But actually, what does that tell you? How is that going to drive your business? Getting really clear on why you're looking for that, if you're wanting shares or saves or likes or reach and impressions, why are you trying to get that? What's that? How's that going to help you reach your big goal.
So it might be things like website traffic, or the source of the leads. So one of my clients is now able to pretty much take her foot off the accelerator in terms of all things social media, because she's really understood that the majority of her leads, and her new business is coming through her past customers and connections and people that she already knows. So in terms of referrals, and recommendations, she's able to really focus the majority of her time on nurturing her existing customers and encouraging them to spread the word, to share the love for her business, and actually encourage people to come and buy from her. So it's dramatically changed the way that she does business. And again, we can get more insights into leads, and you know, the time, the location, what they're interested in, all those good things by really delving in and understanding what data we've got.
And then finally, the last category is sales. And again, you know, we could keep it really simple and just think, so it's the number of sales that I want to make over the period of time. But it might be the type of sale, so it might be you've got a low ticket activity or a high ticket activity. And you know, that actually, you can hit your target by making 10 sales in the high ticket, compared to making 1000 sales in the low ticket. So understanding which is the most beneficial and where you should be spending the most of your time. Again, this comes into the effort that you need to put out there in order to make a sale. Okay, so understanding what that is, or being able to track that it might be the cost per sale. So how much does it actually cost you to go through the process of introducing yourself to someone new, to go through those different touch points, I think it's, you know, anything between 14 and 33 touch points now, for somebody to get to know you enough to want to buy from you. So what is that costing your business? And is there a better way of doing that? Or can you monitor that, to maybe have as an objective to reduce that cost down over the period? Again, linked to capacity that we talked about earlier, in terms of operations, you know, it's all very well making all these sales, but if you can't actually deliver on them, then that is really detrimental to your business and your reputation. And then finally, there's things like customer churn, so whether people are staying with you or whether they're dropping off. So for example, in my The Future-Proof Club™ membership, I have a really low customer churn. So once people come in, it's very rare that they actually leave because they're getting good value from the group, and they're getting that return on investment that they're looking for. So being able to monitor that can allow us then to highlight whether we actually need to look after, or do something different within our processes to make sure that our customers are staying with us longer. And then finally, could looking back over the lagging KPIs help us to analyse and predict different seasons, or trends or things that are happening within our business and the number of sales that we might be making, whether that's, over the summer, and if you're selling something, I don't know, if you're selling a winter coats, then you might know that summertime isn't the best time to be selling those, etc. So making it really relatable, but really based on data and facts.
So all in all, I know that's been quite a full on episode today, but I think it's really important to get under the skin of your business. And I think this will really make a difference. So I really encourage you for today's challenge to come on to the show notes, click through and download the dashboard template that's there. And really think about what those KPIs are for your business. And really think about how you're going to track those. Let me know about it and send it through to me and if you want to have a chat about it, then get in touch on social media or send me an email and we can jump on a call or I can talk you through if there are any questions.
But I think my final piece of advice for today, before I leave you is, assumptions are good. Assumptions are one way of allowing us to predict or to move forward, but actually being really aware of when we are making assumptions and asking ourselves do you have the data or do you know the facts behind this that can either backup those assumptions or actually call them out?
And so really getting clear on what the data is and the things that you know are true. Really tracking those KPIs that will help you to focus on the right things, make those informed decisions and ultimately future-proof your business moving forward.
I will leave you on that. I know that has been quite a full on podcast, but I would love to hear from you and do go and download that dashboard template.
Thanks for listening to the Future Proof Your Business podcast. I've been your host, Lucy Rennie, I hope you've enjoyed this episode. If you have, then I'd love you to head over to Apple Podcast, Google Play, Spotify or wherever you listen to your podcast and hit the subscribe button. And I'd really appreciate it if you'd leave a review and a rating and help me to reach even more small business owners like you who want to build a business they love.
And don't forget, you can head over to iamlucyrennie.com and sign up to my email list as well as find more tips and tools to help you Future-proof your Business on my website and in the show notes.
Finally, I'd love to invite you to come and join me and lots of other small business owners like you. In my free Facebook group, Communicate with Purpose.
You can find all the links on my website and in the Show Notes.
Resource Links:
Which KPIs are for you? Info sheet and dashboard template: herehere
I would love to invite you to come and join me and lots of other small business owners like you in my FREE Facebook group: https://www.facebook.com/groups/CommunicatewithPurpose