Manage What You Measure
Manage What You Measure
I’ve referenced this quote so many times in the past – and only recently found out it’s been credited to legendary Management Consultant and Educator Peter Drucker, not Tony Robbins – but wanted to take a deeper dive into the concept.
Success is often measured by your ability to grow, adapt, and consistently improve. But to be able to grow and adapt, you must have a clear understanding of 1) where you’re going and 2) your performance along the way there. Tracking the right Key Performance Indicators (KPIs) is so important – you can read more about why KPIs are important in this blog post, but today I want to dive into how to identify which KPIs will be most beneficial for your business.
KPIs are quantifiable metrics that help you evaluate how well your business is performing. Here are a few examples to get your wheels turning!
Revenue metrics:
– Revenue growth: the percentage increase in your revenue over time
– Customer Lifetime Value (CLV): the total revenue one customer generates for your business throughout their relationship with you
Customer acquisition and retention:
– Customer acquisition cost (CAC): how much it costs to acquire a new customer
– Customer churn rate: how many customers you lose over a specific period
Efficiency:
– Inventory turnover: how quickly you sell your inventory
– Operating margin: the profitability of your core business activities; how long it takes to produce a specific product and bring it to market, for example
Customer Satisfaction:
– Net Promoter Score (NPS): measures customer loyalty and their willingness to recommend your business
– Customer Satisfaction Score (CSAT): measures customer satisfaction of a specific interaction or transaction
Marketing and Sales:
– Conversion Rate: the percentage of potential customers who take a desired action; for example, how many people who walk into your storefront end up making a purchase
– Social media marketing: likes, followers, engagement etc
Knowing which KPIs to measure can be the difference between reaching your destination — maybe even ahead of schedule — or ending up somewhere completely different.
In his book Atomic Habits, James Clear shares an example that highlights this concept perfectly; if a pilot attempting to fly from LA to NYC shifted the nose of his plane only 3.5 degrees south, he would end up in Washington DC. If that pilot had been frequently monitoring his progress along the route to his final destination, he would’ve caught his mistake early enough to correct it!
Having your final destination in mind is the first step in determining which KPIs to prioritize in your business.
Start with your goals:
your business goals will dictate which KPIs are most important; ask yourself what you want to achieve and work backward from there
prioritize simplicity:
overloading yourself with metrics can be counterproductive; focus on a few that are most critical to your objectives and stick with those for the year
use the 'Smart' framework:
KPIs should be Specific, Measurable, Achievable, Relevant, and Time-bound
So you’ve got your exciting new KPIs… now what?!
Schedule time to review and analyze your data – I’d recommend no less than monthly, but ideally on a weekly basis (during your CEO Hours!).
If you’re just starting out in business, I would recommend focusing on your own performance rather than comparing yourself to competitors in your industry – “don’t compare your beginning to someone else’s middle,” said Michael Hyatt.
Take 90-120 days to determine your average results and set your targets from there. Once you have a good pulse on your performance, you’ll be able to determine when/whether it’s time to pivot.
Don’t forget, the benefit of knowing your numbers is the ability to quickly identify what’s not working and replace it with what is working!
Celebrate what’s working and do more of it!
