Hello and welcome to my business basics series of posts about starting a business and my A – Z of what I consider to be the basics that you need to be working on. This is the eleventh post in the series so obviously – K
You can catch up with the ones you missed by using the search bar in this blog.
K is for KPI’s (Key Performance Indicators)
Key performance indicators are a way of making sure that your business is growing and that you are achieving your goals. They are extremely important as they act as an early warning system to let you know when you are heading into difficulties.
First let’s look at what are considered KPI’s:
- Sales / month
- Leads generated / month
- No of purchases / month
- Amount invoiced /month
- No of people attending workshops /month
- No of people taking your course / month
- Conversion rates
This list is not exhaustive and I’m sure you can now think of lots of things that you could measure in your business to indicate whether or not it is doing well.
Notice that most of them I have put / month? This is because you need a month by month measurement to see how you are progressing through the quarter and the year.
Let’s say that you want to earn £5,000 per month from your business. You sell courses that are £1,000 each. You use workshops to generate leads and you know from experience that you typically convert about 25% of those who attend the workshops into paying customers.
This means that at £1,000 per course you need 5 people to take the course. If you convert at 25% that means you need 20 people to take your workshop to ensure you hit your £5,000 per month target.
Yes, I know, you wish you were getting those kind of conversion rates and numbers and we’ll get to that later. For now and to keep the maths simple let’s just go with it.
So you now know that your KPI’s are:
- At least 20 people attending your workshops each month
- Your conversion rate needs to be 25%
- Your minimum sale needs to be £1,000
Now let’s imagine that when you check your ticket bookings only 10 people have booked on to the workshops so far. This should sound alarm bells as if only 10 people come along then you will only covert 2 – 3 people at a 25% conversion rate. This means your monthly sales will be down by at least £2,000
Having worked out your KPI’s lets you know in advance of a potential problem ie not making enough money in that coming month. It gives you a heads up so that you can do something about it.
You might want to promote your workshops more on your social media platforms or tell your Facebook group about them or put a big banner on your website. At least you can do SOMETHING before it’s too late.
You might also work out that when you are running free workshops only about 50% of those who book actually turn up. This will alert you to the fact that you need to have 40 people booking on to the workshops to ensure 20 of them will actually turn up.
Can you see how KPI’s help you to plan and organise your business. You are pretty much just guessing if you have no measurements in place. Remember, if you can’t measure it, you can’t manage it.
Now, back to those amazing conversion rates I mentioned. I used to think that a nice 5 – 10% conversion rate was great and I’m sure you do too, especially if we’re talking about online conversion rates because they are usually about 1 – 3% if we’re lucky.
But here’s the thing…
You can make a massive difference to your conversion rates by doing just a couple of simple things. Yep, that’s right, 3 simple things to be precise.
I’ve been marketing online for about 10 years now and I have used every strategy there is (even some that no longer exist), so I’ve learnt a few things, and one thing in particular made all the difference to my conversions.
I started using the different strategies together, in other words I was kind of using several strategies as one overarching strategy and this made a HUGE difference not only to my conversions but also to my lead generation and my monthly average customer spend!
I would love to tell you all about it right here and now because it’s such a simple system and it works for every type of business but there’s just not enough time or space in this blog post to fit it all in. But don’t worry…
I’ve created a free guide that will tell you all about the strategy and how to use it to increase your conversion rates and it will even give you step by step instructions to get you started on the first step of the process so you can get started today! I couldn’t make it more easy for you if I tried. All you have to do to get your free guide is complete the form below.
Now all you need to do is make a list of the things that you need to measure in your business. Remember if it can’t be measured it can’t be managed so try and make sure these are things that you will actually be able to count in some way.
There is no right or wrong list of KPI’s, it will depend on your type of business what you measure. For example, if you are an online etsy shop you would want to measure the sales you make each month and compare them to last months or see if you are on track to hit your yearly target.
You might also want to measure the click throughs to your shop to see if they are constant or whether there is something that causes a spike at a certain time or on a certain day.
You will also want to account for any paid advertising and promotion that you are doing as this will have an impact on your results that month and so may not be a typical result. It’s okay but make sure you allow for this in your projections.
That’s it from me for now but I’ll be back next week with the next letter in my alphabet of business basics which is L. Make sure you look out for me, or why not subscribe to my blog and I’ll drop you a quick email when I’ve published something.
I hope you have enjoyed this post and that you will now go and put some KPI’s into your business. If you have enjoyed it I would love it if you could share it so that others might find it and benefit from it. I have included some social icons so please just click and share away.