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Why do you need Key Performance Indicators?

Guest post by: Gregory Kopchuk

Article Overview: If you want the right results, make sure you’re using the right measuring sticks

Why do you need Key Performance Indicators?

Key performance indicators are a way of seeing how your business is doing on a daily/weekly/monthly basis so that you know if your business is healthy and making a profit.

So how do you determine what you should be measuring?

This is a critical factor, because you could be measuring the wrong things.

For example, the government measures how the economy is doing by how much consumers are spending. Yet we hear how Canadians are carrying a debt equal to 120% of their disposable income.

So there are always messages about how to save money. But when people start to save money, everyone starts painting a picture of doom and gloom for the economy.

On one hand they want people to spend money, but on the other they want them to save.

It's a fact that when people save, the economy does not do well.

When people spend, the debt loads go up. Perhaps the government needs to change what it measures to determine the health of the economy.

So what are you measuring on a daily, weekly, monthly basis?

Are you measuring the profits? If you are measuring something with a $ sign then will be the end result.

What you need to ask is what has to happen for your business to make a profit? How many customers have to spend money with you? How often do they have to spend money with you? How many leads do you have to generate to get a new customer?

These are the critical drivers to determine what is important to your business.

I recommend the books Key Performance Indicators by David Parmenter and How to Measure Anything by Douglas Hubbard. If you are in business, you need to understand how and why KPI's are important. Now.

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Article Tags: Business, economy, key indicators, performance, recession, rewards, small business



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