Today’s blog post is a result of having KPI or key performance indicators being brought to my attention by multiple sources over the last week.
Being a finance person, KPI’s to me are fun and provide a different perspective on your business. In this post you’ll learn three reasons why making KPI’s a priority in your management toolbox will help you improve your business.
1. Provides Non-Financial Success Measures
For most of us it is a priority to have financial success in our business, however, there are other measures of success. When my pet business was not achieving the financial success we wanted it was very helpful to have other KPI that provided encouragement and hope. We still focused on improving business profitability, but we also monitored growth, customer satisfaction and employee retention. Growth measures can include number of new clients and units serviced. Compare these measures to the prior month or same month of the prior year to determine your current growth rates.
KPI also provide balance and a big picture perspective when making business decisions. You can increase profitability by cutting expenses, but does the impact on customer service or employee engagement really help your business long-term? Having benchmarks and monitoring these KPI as you make changes help you quickly know objectively negative impacts to clients and employees.
Marketing is an area growing businesses spend a lot of money and focus. KPI provides objective data on source of new leads, cost per lead, SEO rankings, website performance and social networking engagement. By monitoring data trends you have confidence in the effectiveness of your marketing time and ad investments.
2. Improve Team Performance
A key factor to employee engagement is understanding and believing in the goals of the company where you work. As small business owners it can be uncomfortable sharing all your financial information and most of our employees are not motivated to help you increase your own profits or pay. However, you can use KPI to set team goals and incentives. Sharing occupancy data can help your employees understand your business cycles and revenue impacts. Let them know the occupancy levels where you break-even in covering fixed costs so they understand importance of monitoring supply usage and equipment maintenance.
Set a quarterly focus as a team to improve business performance and find a KPI to benchmark and measure your progress. Share KPI progress results weekly and reward your team as you monitor improvement. You can focus on productivity, revenue per pet, employee engagement, specific service unit growth or any problem area of your business. The key is to ensure each member of your team understands their role and how it can positively or negatively impact the KPI.
Sharing KPI can help your team members grow by understanding more about business and the pet industry. Informed staff are more engaged and will be self-motivated to improve their own performance. Be sure you spend time recognizing and celebrating your achievements each quarter.
3. Benchmark
KPI can serve as great benchmarks to industry or other business performance averages or best practices. It can be hard to compare one business to another in financial results due to varying geographic locations and fixed cost structures. KPI serve as a great way to measure your business performance against others.
The annual Pet Industry Financial Survey does provide key benchmarks like occupancy by service, revenue per pet, payroll as a percentage of revenue and average board stays. This is an area of the survey that we would love to see expand in future years to include responses from more pet business owners and new indicators like employee turnover.
How does your pet business compare to the average responses from the 2014 survey on the following KPI?
- Dog Boarding Occupancy – 58%
- Payroll as a Percentage of Revenue – 42%
Key performance indicators are important tools in your business management toolbox. Spend some time reflecting on your business and a problem area where you’d like to see improvement. Select a KPI, benchmark your current score and then challenge your team to make improvements. Create a fun supportive atmosphere and problem solve as a team. You may find that KPI are your new favorite business tool.
Which KPI are you currently focused on to improve in your business? Please share your KPI experiences in the comments below or ask questions on KPI that can be used to help with a business problem you have currently.