Performance Measurement Tips for Your Small Business

“How’s business?” is a question you undoubtedly hear a lot from your customers. And while a simple “couldn’t be better,” might suffice as an answer, there are times when you’ll want to be more specific – with analysts or investors, for instance.

No matter what industry you’re in, there are Key Performance Indicators (KPIs) that can quantify how well you’re doing. The following are a few of the more popular ones, along with some specifics by industry:

In General

Regardless of what industry your business is in, there are a handful of KPIs most businesses should use at some time or another. These can include:

  • Sales growth
  • Market share
  • Customer retention rate
  • Workforce turnover
  • Supplier turnover
  • Age of facility/equipment
  • Customer satisfaction

A web search on any of these areas can reveal a variety of insights into applying and analyzing these metrics.

Restaurants

There are more ways to measure restaurant performance than there are ways to top a pizza. From the front of the house to the kitchen these KPIs deliver it to your liking:

  • Basket Analysis – amount of items a typical customer purchases. Find this by reviewing sales tickets and looking for patterns. Use what you learn to adjust if necessary.
  • Stock Value – how much food you’re holding. Try keeping it under a week’s use unless frozen food plays significantly into your menu.
  • Top 100 – a measure of repeat customers, the ‘holy grail’ of restaurateurs. Track what they spend, how often they visit and look for encouraging trends.

Small Manufacturers

Whether you manufacture spirit gear or speed bike gears, these KPIs can help put production into perspective.

  • Change Measurements – anything that can be tracked and compared periodically, such as number of estimates, orders, etc. These metrics can be used for forecasting.
  • Spoilage – the amount of product that fails to meet specifications; a number you want to minimize. Recycling or donating spoilage can also minimize the impact of lost goods.
  • Repeat Business – indicates how much business you conduct with existing customers on a periodic basis, such as weekly, monthly or annually. A metric to keep an eye on.

Law Firms

Even businesses that are more difficult to measure have KPIs too that can gauge success.

  • Realization – put simply, this is the rate at which a firm is paid; the amount of time it takes from the moment an invoice is sent to a client and payment is received.
  • Margin – the amount of money left once costs are covered, otherwise known as profit. Typically the biggest impediments to higher profits are administrative costs and write-offs.
  • Leverage – the ability to assign work to those in the firm who bill at lower rates and require less pay. By leveraging employee resources accordingly, a firm can keep client and payroll costs down, which is a win for everyone.

No matter how you measure success, KPIs can help you articulate it in terms that go far beyond the anecdotal. And as a business owner, the more granular you are about your own performance, the more successful you can be.

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