Lets face it, doing business today is not what it was twenty years ago. New streams of communication, emerging technology, and data driven business models are constantly changing. The largest corporations place high value on data so its no surprise that they spend big bucks on acquiring the right numbers. But just how important is data? How can you use it to make better business decisions, and how much can it impact your bottom line? We'll answer these questions, dive into modern business strategies, and analyse the importance of data to business.
Key Performance Indicator
What exactly is a KPI? KPI stands for Key Performance Indicator and is a metric derived from industry. Key Performance Indicators reveal insights into an operations level of productivity. But what industries use KPI? Every industry! From hotels to gyms, restaurants and taxi drivers, every business can benefit from a KPI analysis.
Put it simply, Key Performance Indicators show the weaknesses and strengths of a business by analyzing a sector of that business, gathering the metrics behind it, and diving into the process itself. Imagine a hotel owner who's property is not performing as well as it did two years ago. Logically the owner would want to know the root behind the decrease in performance. How would he/she go about this? Having a database of KPI's at his/her disposal would reveal the outlier metrics and from there, the underlying problem. Perhaps the new housekeeping staff is not performing as well as it did two years ago, or perhaps the market shifted due to outside factors. Reviewing the metrics will provide the owner with an answer.
What KPI's Should I Use?
Every industry has its own KPI's. There is a plethora of resources for the average small business owner to leverage. A quick search on the internet yields many different KPI equations for the average small business. Search for your industry and select the best & most useful KPI's that you feel will provide insights into specific problems you may be facing.
How do I track my KPI's?
From sales to salaries, every KPI is different. Some KPI may be gathered through a simple review of the balance sheet while others require stricter, more creative methods of data recording. Lets look at the restaurant sector. Lets say a restaurateur would like to know how many people he is seating on average per hour. He/she would simply record the number of people who dine at the restaurant and divide that number by the open hours.
Average Guest Seated per Hour = Number of Clients/Open Hours
Simple! These surveys should be updated as the operation & market changes to reflect a more accurate representation of whats actually happening. Remember, focus on gathering the metrics that matter. There are thousands of KPI equations, only focus on what you feel will improve your operation.