How do you know the health of your business? Most leaders watch monthly profit, Cash, or sales. These are important but they do not make good KPIs. Here are a few tips on KPIs.
First, you need to see trends not numbers. Use a historical list of, say, the last twelve months. The further back you go, the better. Then graph it. A graph can project near term likelihoods and longer-term trends. Good KPIs are graphs.
Second, a good KPI adjusts for seasonality. If, for example, you sales rise in the summer and drop in the winter then this month’s sales number means little. If your business has seasonality, you should be tracking rolling twelve-month averages.
Third, smart KPIs don’t track the bottom line. They graph movement that impacts the bottom line. One CEO I work with tracks the equitant of truckloads delivered. If truckloads are up and profit is down, you know you have problems in your pricing or operations.
Finally, how many KPIs should a leader follow? Acceptable practice is six to eight. No more!
Building KPIs is challenging … but well thought-out KPIs are an essential TBR Best Practice.
If you’d like to learn more about developing solid KPIs, go to Texas BusinessRadio.com AND click the Vistage Banner and I will follow up with you.
Sponsored in part by:
Jay W. Curry
Along with hosting “Texas Business Radio”, Jay is a Professional Certified Coach and Master Chair facilitating four Houston-based Vistage peer groups. In addition to being a best selling non-fiction author, the 2015 release of his award winning novel, Nixon and Dovey: the Legend Returns, adds novelist to his title. Jay holds a BS in Mathematics from Oklahoma State and an MS in Computer Science from Kansas State. You can learn more about Jay HERE.