Key performance indicators, or KPI, are the lifeline of any organization. All of us are so familiar with KPIs as employees. But when you transition to an entrepreneur, KPI will become the lifeline of your initiatives. Hence, one of the first lessons you should learn from your business mentor is about KPIs. Yes, KPIs are your report cards and your milestones that tell you what success should look like.
Why are KPIs important for your business?
One of the biggest danger zones any entrepreneur will get into is the temptation to deviate from the plan. KPIs help your business focus on your goals, so you do not deviate from your plan. KPIs are also a great measure that will give you measurable data to determine whether your organization is on track to achieving your objectives.
A few examples of KPIs include
- the magic number of new customers by a specific period
- achieving breakeven within a specific time
- a specific sales goals in numbers
- the percentage of sales growth to be achieved within a specific period
- gross profit margin
- and any other definite measurable that will connect to your goal.
How should you select your KPIs?
The first step is to visualize what your entrepreneurial outcomes will look like.
You will then need to know the specific short-term and long-term deliverables, results, and activities that will be a measure of your success.
As a next step, you will need to determine specific measurables that will define these pointers. Define the specific reports, numbers, values, and indicators that will support the measurable
Then define the detailed processes that will help you get to these micro and macro goals
Don’t forget to account for deviations and scenarios that could take your focus away
One of the biggest mistakes first-time entrepreneurs make is to put a never-ending list of KPIs. Yes, at the first stage, everything appears critical and crucial. But you need to get your priority list straight and go in for the top 5 or at the worst 10 KPIs.
Most importantly, you cannot avoid change in any aspect of your life, especially your entrepreneurial life. So keep some scope open for reviewing your KPIs and strategies and regroup or revise as required
What should great KPIs look like?
Great, effective, and smart KPIs have a lot of common characteristics. Let’s check out a few of them:
- They are connected specifically to the goals of your company. They should accurately measure what you want for your customers, your organization, and all your stakeholders
- Your KPIs must be realistic. The biggest danger while strategizing is the tendency to go utopian; hence be sure to be practical about the results you are aiming to achieve.
- Your KPIs should be comprehensible so your entire organization understands their significance
- The KPIs should be measurable and translatable to numbers easily
- KPIs should definitely be time-bound and help you get closer to your goals
We’ll soon look at some inspiring examples of KPI soon. So, if you are an aspiring or first-time entrepreneur from India, and if are looking for an entrepreneurial mentor who can help you get started on your entrepreneurial journey, do get in touch with me. I am your entrepreneurial Sarathy!