Key Performance Indicators: The Rules of the Game When You Play to Win

Written By Dave Lavinsky
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One of the challenges of running an organization is that you aren’t directly accountable to anyone.

Of course, you’re accountable to many people — your clients and customers, your employees and stakeholders.

But you don’t have one person to whom you report. With whom you set goals. And who forces you to make commitments and attain those goals.

Unless you have a Board of Directors or Advisors, of course, but even then, those encounters are often only quarterly or monthly at most.

Rather, as a business owner, you are most accountable to numbers; specifically the business numbers, metrics, or goals you want your business to achieve.

So, let me ask you a question:

Do you know what specific numbers, results and/or goals you absolutely must achieve in the next 12 months?

Clarifying these goals is a key part of the strategic planning process. And I’d be lying if I said this was always comfortable and fun. Because to do it right, you need to break down all of your big goals into parts (more on this below).

Accordingly, as business owners, we tend to put off developing our strategic plans since our employees and customers rarely if ever ask to see them.

It’s one of those “Geez, I should probably get around to this” items that no one else knows about, so it’s easy to keep on the perpetual back burner.

But what my students and I have found is that once you have a formal strategic plan in place, even if it’s not perfect, the path in front of you becomes much clearer.

Specifically, when you set your goals, identify the Key Performance Indicators to monitor and improve and help you get there, and break down the big, ugly projects into smaller pieces, the future becomes much clearer and much more attainable.

In fact, the process of reaching your business goals can become a fun game to play–when you do this and truly know how to win!

Consider this…when you play tennis, or Scrabble, or some favorite game of yours, aren’t your objectives usually the same (score the most, win the game), but the rules by which you score points and succeed along the way is different?

Tennis has its own unique scoring system (my wife was a competitive tennis player, so unfortunately I’m used to saying “Love-40” when I serve). And Scrabble has points and Triple Word Scores to shoot for along the way. Which leads to this key question: what are your business’ key metrics that you must focus on in order to win?

Understanding and improving these key metrics, which we refer to as Key Performance Indicators or KPIs is the key to winning in business. So, what are some of the KPIs you should be monitoring?

First, there are some common KPIs that most businesses watch-the Revenues you generate from your products & services, your core expense groups, like Marketing Expenses, Operating/Fixed expenses, etc.

There’s also your general Marketing indicators to watch, like the total number of new leads your ads generate within the time period you’ve chosen. You’ll want to pay attention to what each new lead costs you, what percentage of them buy something, and what the average sale price per transaction is.

Some marketing indicators will be different for each kind of advertising you do. For example, if you’re sending out direct mail, you’d want to know how many people you’re sending mailers to and how many responded by phone (or online) to know your response % as well as your Cost per Lead for direct mail.

Or, if you’re using Search Engines to help people find your business online, at the least you’ll want to know which keywords you are trying to rank for, what your current rank is for each, and how much traffic and leads your website generates.

Improve Your KPIs to Win the Game

By improving your KPIs, for example, by increasing the number of leads, sales, and order amounts, or the return on investment of an advertising campaign, you will increase your revenues and profits, and move closer to victory in your market. Conversely, the market losers are the ones who only focus on “topline” metrics like total revenues and profits. By focusing on these, you never fully focus on and improve all the drivers of those figures (the specific KPIs).

In summary, identifying and improving your KPIs is THE WAY to reach your business goals and win the “game” you’ve created. Identify them with a fine tooth comb. Pay attention to them. Find ways to improve them. Work hard until you see results. And don’t forget to have fun and enjoy the game!

Suggested Resource: You just learned the importance of watching and improving your Key Performance Indicators…part of a good strategic plan to guide you in growing your business. What else should you include in your current growth plan? To have a great strategic plan, there are 13 crucial sections. Click below to learn about them.

Do You Have A “Killer” Plan?

This simple tool gets your whole team pulling in the same direction, so you overcome your biggest business challenges.

The best part? You can get it done in 1 day.

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Click here to create a “killer” plan today.

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