Using key performance indicators to grow your business

With 2020 behind us, January is the perfect time to consider what the year ahead should mean for your small business. Setting one long-term goal related to your business's mission statement or its overall purpose can help you to focus on setting smaller objectives throughout the year to stay on track.

While it is critical to have a long-term goal in mind, even more important is identifying the metrics you will use to accurately track your progress as the year continues. In a study by Clutch, the majority of small-business owners were found to have set a goal for their company within the past year; only 5% had actually achieved what they had set out to do, however.

Read on to learn how you can effectively set and achieve goals as a business owner by identifying the most productive ways to measure growth throughout 2021.

Set a realistic goal
Before determining the most meaningful indicators of progress for your organization, you should first identify a goal that is realistically attainable based on the current size of your business. As an example, rather than setting out to be the leader within your entire industry, first focus on attaining a certain percentage of the market within your primary market.

One method to setting an attainable goal is to follow the "SMART" framework, first created in 1981. In order to ensure your goals are aligned with the scale of your organization, they should be specific, measurable, achievable, relevant and time bound. Following this framework will help you to not only have an overall vision for your business, but it will also inherently guide you to the most relevant key performance indicators.

Creating a realistic goal for your organization will help you to identify an objective and accurate way to measure your business's progress.

Defining your key performance indicators
Once a business owner has a clear understanding of their goal for the year, they must identify a set of at least five relevant key performance indicators that will best measure their progress. Defined by Investopedia as a set of quantifiable measurements used to evaluate a company's long-term performance, KPIs are metrics that can be used to determine a company's growth compared to their past success.

The metrics an organization selects can vary depending on their unique goal, with some being financially focused, such as measuring net profit or lead conversions each year, and others involving marketing goals or employee retention. Each company's KPIs should be specifically selected with their long-term goal in mind. If an organization's goal is to attract a specific amount of new talent, it is unlikely that comparing foot traffic in their brick and mortar stores throughout the year will reveal how successful their hiring practices were. 

Evaluate and Review
As your business begins to successfully reach its goals, it's important to continuously assess your KPIs as they will allow you to identify which business activities were the most beneficial as well as  where your organization still has an opportunity to improve before the year ends. 

For more small business guidance, don't hesitate to contact the The Law Offices of Donald W. Hudspeth, P.C. online.

Categorised in: Starting a Business in Arizona

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