What are KPIs and why do I need them?
Key Performance Indicators (KPIs) are the scoreboard for your business. They’ll tell you where you are winning and where you need to improve. Imagine going to a basketball game where there was no scoreboard. Just two teams playing basketball. You’d be outraged and demand the score be displayed. Yet, like many other business owners, you run your business, your livelihood, your retirement strategy, without a scoreboard.
Why are KPIs Used
As a Business Owner, you sometimes feel overwhelmed and distracted with all of the daily activities and tasks. Yet you must make important decisions, quickly, with great consequences, and often with limited information on hand. Without the right KPIs to guide you, you tend to focus too much on the tactical daily issues and neglect the strategic decisions that have critical impact on your success. You can’t manage or grow what you don’t measure.
What KPIs Should be Used For
KPIs will communicate and inform – your team, suppliers, and customers, about the business situation. They act as a diagnostic to tell you the health of your business in many different areas. They are a source of learning – which marketing, which programs are working or not working. And they guide your decisions and help you define what action to take next.
What they should NOT be used for is controlling. It’s tempting to try to control employees and others using KPIs. I’m not saying don’t use them with employees, but use the right ones, and use them for continual learning and improvement, not to control how many times a day they use the restroom.
How To Implement KPI’s
Step 1: Define your strategy
- Strategy reflects the company Vision, Mission and Values – do you have yours well-defined?
- Set goals
- What are your most important business objectives?
- What “drivers” are critical to success?
- What impacts driver results?
- Which can align team members on strategic issues?
- Which can identify barriers to growth?
Step 2: Audit Existing Measures
- Assess strategic fit of your existing KPIs
- Identify what data is available
- Review measurement processes
- Review Accuracy
- Review Timeliness
- Identify gaps
Step 3: Develop New Measures
- Bridge the gaps identified in Step 2
- Measures must reflect performance and progress of business
- They are quantifiable
- They are actionable
- They are comparable with another number
- Last year
What are the trends? Look at your KPIs over time to see more deeply what they’re trying to tell you. A measurement by itself with no comparison is not as revealing.
Step 4: Analyze and Report
- Make it easy to read
- Create a one page summary
- Include visuals & graphs
Step 5: Continuous Improvements
- Set priorities based on strategy
- Ensure your goals are SMART
- Assign accountability!
- Track improvement
- Set new goals!
Start today by listing the key drivers in your business. If you’re not sure, start measuring the 5 Ways numbers: 1) Lead generation – where are your leads coming from; 2) Conversion – how many do you turn into customers; 3) Average dollar sale of each transaction; 4) Number of transactions – how many times does a customer buy; and 5) profit margin, gross and net. Sign up for a workshop to learn more.
This article provides an overview of the five steps of setting KPIs. Look for more details on each step coming up in the next posts.
How often do you ask yourself if you’re paying for marketing that doesn’t work?
In my sessions with business owners, I will sometimes ask if they would hire an employee for $40,000 a year and then never check to see if they accomplished anything or even showed up to work. They usually look at me as if I have two heads, and say “Of course not!” Then I ask, why they do just that with their marketing budget? Then the look changes to mild guilt.
Obviously, your marketing budget may be significantly more, or a lot less, but the principle remains the same. Our marketing spends are often determined by what we have done in the past, or what we feel is affordable. I spoke to a business owner who told me they stopped advertising in a directory completely after having run the equivalent of a full-page ad for an extensive time. When I asked why, they said it was too expensive. I asked what type of results they had gotten, and if they received any type of reporting. The business owner indicated the reporting was excellent, but they were too busy to ever look at the reports.
“If you can’t read the scoreboard then you don’t know the score. If you don’t know the score, you can’t tell the winners from the losers.” Warren Buffet
I’m not promoting one advertising medium over another as they all have their strengths and applications. I am saying that unless you want the equivalent of a $40,000 employee that does not show up, it is imperative that we test and measure the results from our marketing to make informed decisions on what to increase, decrease, add and subtract. Here are a few simple concepts to start the process.
Define your purpose for the marketing investment:
If the purpose of the marketing is to drive revenues and profits, then the measurements of success need to reflect that. If the purpose is something else, like create brand awareness or educate, then adjust your measurements accordingly.
Track your leads and record the prospect’s data:
At the very minimum always ask the prospect some version of “How did you hear about us?” Collect their information and put it in a database. The goal is to know how many leads (and ultimately how much profit) per week or month are coming from each marketing medium and be able to continue to contact those leads. I know from my mystery shopping this is a huge leak in the pipeline for most businesses.
Know your key numbers:
Marketing is simply a matter of buying clients for less than their lifetime values. Many businesses will not break even until after a new client makes more than two purchases. A chiropractor and a hair salon are two good examples where loyal clients have many transactions over a period of years. The two key numbers are acquisition cost (cost of gaining a new client) and lifetime value (how much in total the average new client will spend as your client). The key to making marketing an investment is to keep the acquisition cost as low as possible while driving the lifetime value as high as possible. How much do customers from each lead source spend with you? Do you know your numbers?
Use the information you collect to make educated decisions:
Once we record the information over time, we will know the acquisition cost for each marketing method as well as the number of new clients driven by each technique. You will likely notice a significant difference in the lifetime value of clients from different method. Build the information over time and use it to determine how to allocate your budget.
There are entire books written about these concepts and others. The real key is to start systematically recording your information now to increase your revenues and build your decision-making database.
Whatever you do, make sure you’re getting a great return on your investment from that $40,000 employee!
Learn more about marketing and other business results generators at GrowthClub June 20th.
Time – Can You Ever Get Enough?
Whether you own a business or work for someone who does, you have probably experienced the “never enough time” phenomenon. When I worked in the high-tech world, we never had enough time to do it right, but always plenty of time to go back and fix it later. This practice was also known as using the customers for beta testing.
If we want our businesses, and ourselves to thrive, then we must focus on two things: 1) doing the right things, and 2) doing things right. Stephen Covey, in his book “The 7 Habits of Highly Effective People” offers a powerful tool, the Urgency vs. Importance matrix to achieve both goals.
In this matrix, Quadrant 2, is a set of activities in a business, or your life, that are Not Urgent, but are Important. This quadrant is the Zone. The Zone is that place where you set aside all the busy work of the day and focus on the things that are truly important for your long-term success. These are activities like planning, strategy, learning and cultivating relationships.
So how do we get in The Zone? First and foremost, you make a conscious decision to get there. It will not happen naturally, because these tasks are not urgent, they are not in your face demanding attention!
When was the last time your most important client called you up and demanded that you get to work on your cash flow forecast? Probably never, but when was the last time a client complained that you didn’t have the right parts in stock, or that her order was a week late? Did you take the time to tell her that earlier this year you failed to budget for parts stock, or that you failed to plan to replace that aging equipment?
This is one of the hardest things for my clients to see. They are constantly in the “urgency” quadrant, specifically because they don’t spend enough time in the zone. Every day I hear about how overwhelmed they are, because of all the urgent daily demands. Getting in the Zone takes practice to become a habit. Here are some tips for how to do so.
Put it on your calendar on a regular basis
Scheduling time for planning activities is probably the best and maybe the only way to ensure that they get done. You should spend 20% of your time in Zone activities, but that doesn’t necessarily have to be weekly. It could be on a monthly or quarterly basis. One way is to allocate 4 hours per week to planning (medium-long term, not short-term), plus 8 hours per month, plus 16 hours per quarter, perhaps in an off-site session like GrowthClub.
Establish a system for accountability
Accountability will help you reinforce the need and the habit. It can be a coach, an accountability partner, a mastermind group, a partner, a spouse or anyone that you will feel accountable to for following through. Be sure that they know to ask you when and how you are allocating your time. Be sure that you have deliverables to them for the output of your planning, then review and discuss it with them. HINT: if you’re not willing to do this, you’re not committed to achieving the goal.
Break up the work and the time into proper-sized chunks
Some people work best in 30-45 minute bursts, other prefer 2 hour chunks of time. Pay attention to your own attention span and work style. Then allocate the most efficient periods of time for you to get your Zone work done. Break up the work into properly sized chunks so that you can accomplish something meaningful in each time period. Know yourself, and when you set aside your Zone time, make sure the chunks of time will be most effective for you.
Pick the right time of day for your Zone activities
In every business and for every person, there are times of day or days of the week that are better or worse than others. If you know that Monday mornings are always crazy, don’t allocate any Zone time for Mondays. You also know your own daily flow, so be sure to schedule your Zone time at a time of day that is best for the type of thinking you will be doing – creative out of the box brainstorming or detailed number-crunching.
If you want long-term success in your business and life, it takes this kind of intentional disciplined planning. Success rarely happens by mistake. Be sure that you are always planning for success, not just this week, but for the next decade.
If you want to really learn how to get into the Zone, come to my TimeWise workshop Friday March 17, 2016 11:30 – 1:30.
How to Get Your Team Engaged
Is your team engaged, enthusiastic, motivated, and committed; except for the 8 hours they work for you?
You can hire people, you can fire people, and you can tell them what to do. What you can’t do is make them like what they do. Some business leaders are content with having an unhappy team. If they just do their job, then their mental state is superfluous. This line of thinking is not only wrong, but it is entirely counterproductive to the continued survival of a business. Gallup has run some excellent reports that demonstrate the performance difference between engaged and disengaged employees. They identified many benefits that engaged employees bring to the table: motivation, innovation, and a willingness to take on more responsibility within the company. So how can you keep your team engaged?
That level of team engagement contrasts greatly with employees who don’t even want to be there. They do their jobs, but they never put in more than the bare minimum of effort. Don’t expect them to ever go outside of what their job description requires. If there is a chance for them to skip out on work without getting fired, they’ll take it. Obviously, you don’t want to have a team that consists of these people. But without the right knowledge of how to motivate a team, you’ll find yourself unable to inspire your employees to go above and beyond the basic requirements.
A great company cannot exist or grow without great employees, and there are steps you can take to mold them into the people you want to have working for you. These tips are proven methods of getting your employees engaged in what they do, and anybody can learn to apply them.
1) Keep Your Team Engaged: Be a team, not a dictatorship
Every ship needs a strong captain, but that doesn’t mean that you should spend every second reminding your employee who’s the boss. Your employees look to you for guidance, but they also want to feel as though they are part of a team, and you will pitch in when needed to get the job done. It’s very tempting to just give orders, or worse, rattle off long lists of directives that you just don’t want to do. If you give the directive and then pitch in to reach the goal, you’ll show your employees that they are all part of a team, and they sink or swim together.
2) Keep Your Team Engaged: Give them a chance to shine
It is true that some people are placidly content with being a cog in the wheel. I’m sure you know of at least one person who is sitting in a job they are relatively indifferent to just so they can collect a pension in twenty years. Those that fit that mold will gravitate towards jobs that give few chances to stand out and plenty of job security. For those who want to achieve more, they will never settle for a job pushing pencils all day. These more ambitious employees are always looking for a way to prove to you that they are capable of so much more than low-level work. Denying them this opportunity will either push them to greener pastures, or if they can’t/won’t quit, cause them to become disillusioned with what they do.
If you find somebody who wants to prove themselves, let them. But give them room to fail as well, give them the objective, then let them figure out how to accomplish it. An employee who shows the initiative and drive to better themselves is a person that will bring your business an incredible amount of value. Don’t waste this potential.
3) Keep Your Team Engaged: Don’t take them for granted – show your gratitude
This goes beyond a simple “thank you”, although those two words can have quite a bit of power in themselves. If your employees feel like their contributions are not recognized or rewarded, then they will feel little incentive to go above and beyond in what they do. How you show this gratitude is as important as the action itself, because a perceived token gesture is even more insulting than a lack of a reward at all. Put another way, if somebody comes up with a million-dollar idea and you give them a monogrammed lanyard as a gift, don’t expect that person to stick around. Rewarding achievement is the flip side to punishing failure, and a balance between both is necessary to craft the ideal team.
As intuitive as these three traits seem, you probably know from personal experience that a lot of managers don’t quite know how to implement these strategies effectively.
If you find yourself having difficulty reaching your employees, get in touch to find out how my Engage and Grow program can turn your employees into high performing leaders within your company. Start with a free employee engagement assessment survey.
How your competitors are getting ahead.
Every business has its competitors. And while market analysis isn’t exactly a new practice, markets for any product or service are becoming increasingly competitive. Today’s key players are constantly hunting for ways to fine-tune their intel. If you’re already on top of knowing your competitors, great, but the thing is, instead of turning only to who you’re competing with, don’t forget to also focus on who you’re competing for.
As a small business owner, you are aware of the competitors in your local marketplace, but what about online? During the buyer’s journey (the marketing funnel), potential customers are looking to your website for education on your products or services. In fact, 97% of consumers use online media when researching their local market (1). Because of this situation, businesses no longer control the selling process — buyers do.
Your company’s website is a key factor to converting leads. In order to maximize its full potential, you’ll need to assess how your marketing efforts are stacking up against your competitors. Keep reading to learn the key steps to conducting a market analysis, putting you two moves ahead of your competitors.
Identifying multi-level competitors
When you’re a small business, you might consider the obvious multi-million company as your competitor. In this step, choose your top three competitors on a local level, a regional level, and a national scale. Also consider other alternatives your customers could buy instead, products from companies that are indirect competitors. Acting as a starting point, this helps you narrow your audience, working your way outwards.
Drawing in your target audience
It’s one thing to speak loudly, it’s another for people to listen. Trends are showing that audiences are less likely to respond to salesy ads and traditional banners. Instead, opt for a genuine relationship with your customers, one that you nurture over time. You can do this through high-value content, give away resources (such as how-to guides), and social media. You have to give before you can get.
Assessing your website conversions
Your website is pretty, but is it bringing in numbers? Do you consistently look at your analytics data, do you see patterns? If your page loads too slowly, or your search terms are misleading, you may have a high bounce rate. If you’re providing great blogs, your click-through rate is fantastic, but are you asking them to take a specific action? The answers are all there in the stats. Next, you’ll want to take a look at the overall growth and measure it side-by-side with your revenue. Customers are actively looking for value, especially online. How well are you positioning them with the content you’re providing?
Considering industry trends
The world is changing every day, the same pertains to technology. With Google and Facebook accounting for 76% of internet advertising growth this past year, it’s wise to incorporate trending factors into your strategy. Mobile is exploding and visual engagement continues to excel. Opt for stunning visuals with value-rich content to gain the attention of customers.
Identifying areas of improvement
Are you blogging at least once a week? When was the last time you updated your website content? Always be looking for areas to improve. As you bring in customers, ask how they found you. If online, dig a little deeper and find out where. We highly recommend performing a quarterly marketing analysis to identify strengths and hurdles, project trends, and adapt your plan of action.
How do you use market analysis to steer your advertising efforts? Share your ideas with us.
Top 10 Tips on Leadership
What’s the difference between leadership and management? A manager tells people what to do and advises them on how to do it. A leader inspires people to achieve great things, and encourages and motivates them to find ways to do it. Yes managing is faster in the short-term, but leadership is the only way to leverage yourself and cultivate your ideas beyond what you can personally accomplish.
Here are 10 simple things, that you can do, starting today to be a better leader:
- TALK ABOUT THE FUTURE – Leaders think about the future and help others see the future. As Mark Collar says, “Leaders teach people to dream, not just execute”.
- TEACH SOMEONE SOMETHING – Leaders are engaged in their organization and committed to growing organizational capability. Nothing sends that signal stronger than taking a moment to teach someone something.
- SEEK OUT A NEW IDEA – Actively look for ideas and then champion them in the organization. This says a lot about your ability to accept change as a leader.
- TELL SOMEONE THEY DID A “GOOD JOB” – Leaders are not afraid to hand out praise when a job, large or small, is well done. This builds not only enthusiasm for the work, but trust in your management.
- GET MAD, THEN GET OVER IT – Leaders all have passion for the business and sometimes this passion turns to anger or frustration. This shows you are only human. An effective leader has the capacity to move beyond emotion into constructive action.
- MEET SOMEONE NEW IN YOUR ORGANIZATION – Get out of your office and say “hello,” to someone new in or near your group. It’s guaranteed that you will learn something and it is visible proof to your organization that you care.
- SAY “YES” – Leaders aren’t afraid to make a commitment, to make a choice, to move on. Find something where you can say “yes.” Nothing says you trust your organization more than the power of agreement.
- ACTIVELY LISTEN – Many of us talk about being good listeners, but few of us are really good at it. The next time you have the opportunity to listen to someone, use clarifying and confirming skills, but don’t offer a point of view until the presenter says, “What do you think?”
- BE ENTHUSIASTIC – Leaders have enthusiasm and energy. They transfer this energy to the organization and the business issues at hand. Practice being outright enthusiastic about an idea and watch how people change.
- HAVE FUN – Leaders typically enjoy what they are doing, no matter how tough the task. People want to follow someone who enjoys what they are doing.