KPIs are the performance metrics that allow you to measure (and know) how your business performs. This will help you to know how you are doing and also to improve your decision-making.
Because what you don’t measure, you can’t control, let’s go straight to the machaca and get to know market-focused KPIs, so we have our business under control.
INDEX
WHAT’S A KPI?
KPIs are simply the metrics that will allow us to identify the performance (based on previously set objectives) of our company, in this case, the markets.
When the performance of the company becomes tangible and quantified, it facilitates decision-making that will determine (for the better) the financial, operational, logistical, and strategic future of what is being analyzed.
WHICH KPIs ARE ESSENTIAL IN YOUR MARKET?
The industry sets up the measurement of its goals and objectives, taking into account three basic criteria: financial status, customer satisfaction, and the performance of internal processes. That said, we can now start setting our KPIs, but first, let’s talk a bit about each one of them.
FINANCIAL METRICS:
Show me the moneeeeey!
Everything that represents money, these are the financial metrics. Among these, we have, for example, net profit, which is simply the amount of money that a company can dispose of after paying its obligations in the form of taxes or expenses.
Another essential KPI is the net profit margin. It will tell us how much of every dollar that comes into the company will be translated into profits, which will tell us whether a business is pulling or not. Also, if we want a long-term vision of the business, it will also indicate the growth projection.
This KPI is calculated as follows:
Net profit margin = net profit / revenue.
This metric can also be used when a new competitor wants to enter a particular market. The net profit margin would be the percentage that the new competitor must reach for its business to be viable.
SATISFACTION METRICS: THE CUSTOMER IS KING.
Customer-centric metrics are based on 3 fundamental pillars: satisfaction, retention, and efficiency per customer. The most widely known metric is customer lifetime value, which projects the total amount of money a customer will spend on our brand over the course of the entire business relationship.
This goes along with customer acquisition cost, which clearly represents the total cost of acquiring a new customer, through marketing campaigns and brand recognition itself. Having these 2 KPIs clearly defined, we will be able to design a strategy based on the results obtained.
INTERNAL PERFORMANCE METRICS: THE HOUSE IN ORDER.
Like manners, being organized is learned at home.
The law of correspondence says: «as it is inside, so it is outside». The internal condition of the company is reflected on the outside.
Therefore, it is necessary to measure the processes and thus constantly monitor the organization’s operational processes and ensure that everything is working at peak performance. For example, if we want to calculate the quality indicator we divide the number of products produced by the number of products that have passed quality control to obtain a performance metric, hopefully at 100% 😊.
Another metric is the famous ROI, or return on investment, which is the percentage ratio between profit and investment. If a company made an investment of US$500,000,000.000 and made a profit of US$20,000,000, the ROI was 4%.
IN SUMMARY
We have seen a brief overview of what KPIs are, what they are for, how they are calculated, why they are calculated, and what is a good standard… KPIs are a fundamental part of strategic planning, a basic component of any company, no matter if you own a multinational behemoth or a small business.
In the following video, our founder, Tio Joe, in conversation with Israel Moyeda, tells us about strategic planning and KPIs.
