“If you can’t measure it you can’t improve it” – Lord Kelvin.
Every business has a set of goals and objectives the business wants /needs to achieve. Key Performance Indicators (KPIs) are simply indicators that measure the performance of your business against said goals. It would be difficult to realise growth within your business if there’s no intentional measure to track success. This is why from Day 1 setting KPIs for your business is key to both its short term and longer term success.
Indicators should not only track financial measures such as revenue / turnover growth, margin improvement, inventory levels, cash on hand etc. – although these may all be critical to your business- but rather provide employees with a focus on the big picture. As owners, different departments within your company should be tracking different indicators of performance. For example, the performance indicators within your marketing Function should differ from those of your Operations function, however combined both sets of KPIs should reflect what matters to your customers and inform your priorities.
KPIs are a critical indicator of success for any company whether large or small. Companies across different industries may share common Performance Indicators such as sales conversion, revenue, product recall ratios, costs, employee satisfaction, customer acquisition and profit ratios per month, while for other businesses, their KPIs may differ. Think of a Not for Profit Organisation where company sales / revenue could feature as a KPI but not necessarily net profit or gross margin.
When running a marathon, at every few kilometres there are signs that provide you with an indication of how far you have run. These signs are key because they can motivate your performance, inform your pace but most importantly helps you to better understand the distance to your end goal.
As a runner, I can surely say that these indicators help me to remain motivated and allows me to adjust my pace depending on my goals. KPIs in business play the same role, they keep the structure, inform on performance and keep employees within the business focused on ensuring the right outcomes.
Examples of leading brands across Africa and their KPIs
Here are examples of a few high performing businesses in Africa and their KPIs:
Trivago: A hotel and accommodation booking site.
- Number of partner listings: The total number of listings on their platform.
- Total instant bookable listings: Properties that can be booked instantly.
Sun International: A leading hotel resort and casino chain founded in South Africa.
- Energy management: The physical utilities of their hotels and resorts.
- Average room rate: The average that the hotel charges for a room over time.
For E-Commerce, let’s take Yashry, an Egyptian online fashion marketplace.
- Active customers
- Active sellers
- Shopping cart abandonment rate: How many customers fill carts they don’t check out.
Software as a Service, Paystack:
An African fintech company that facilitates online transactions, acquired by Stripe.
- Customer Lifetime Value
- Customer Acquisition Cost
- Quality lead flow: How many of the leads brought in are retainable, repeatable clients.
Your KPIs must be actionable, easy to measure and time-sensitive.
Other important factors to note when establishing your KPIs are that it must be:
- Clear and Simple as they communicate your business priorities.
- Unique to your organisation. Apply metrics relevant to your business and avoid conforming, where possible, to market standards.
- Easy to monitor.
- Aligned with your business goals.
At My Growth Academy, we’ve simplified the process into 4 steps:
- Understand your customer – What matters most to them? This matters whether you are a large or small business
- Develop a focus – What are my Goals and Objectives? It cannot only be about your sales or profit margin. What about your product? Customer satisfaction?
- Identify the right KPIs – What 3/4 things matter most to our business and customers? How do I track and measure this? Internal dashboards maybe.
- Continue to Measure and Improve – Regularly monitor where the business is against your business goals, share performance data, act sooner and not later.
In summary, KPIs should serve as a guide in helping your employees understand what matters most to your business. They must align with the long term goals whilst remaining easy to monitor and measure.
To use an analogy, think of the process of trying to determine your KPI / set of KPIs as preparing to plant seeds. You don’t just grab any seed and start planting. You first decide what you want to produce then grab the best possible seed /s suited for your garden.
First, understand your organisation’s vision then work hard to identify the relevant KPI / set of KPIs to focus on to support that vision. If executed well you should see a significant improvement to your business as you zero in on what really matters to both you and your customers.