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KPIs: Why They're Critical to Startup Success

KPIs need to be achievable and actionable. Don't know where to start? Read on.
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KPIs. If you're unfamiliar with this acronym, listen up, because they're essential to any business. Or maybe you've heard of KPIs and know you should have them, but don't know how or where to begin.

KPI stands for Key Performance Indicator. It's a benchmark that you use to measure the performance of various aspects of your business. KPIs are important because they help you evaluate, on an ongoing basis, the success of a particular part of the business or a specific activity. They can be used in almost any part of a company. In finance, you can establish KPIs for revenue or operational expenses; in marketing, the rate of customer acquisition; in HR, the rate of employee turnover. The list goes on.

But you can't set KPIs willy nilly; they need to be achievable and, perhaps more importantly, actionable. Where do you begin? Here are five tips:

1. Match company goals with the results you expect

Evaluate your business goals and apply these to the results you want from your KPIs. If "cost per new customer acquisition" is a big part of your business, set that as a KPI. If "revenue per sales transaction" is a big factor in your retail store, track that. But remember that KPIs aren't just used to measure finances; they should be used in a variety of areas.

2. Capture and and analyze data

KPIs won't do you any good if you can't easily get and report on the numbers. This might mean you have to create your KPIs based on the information available to you--not ideal, but better than nothing. You also don't need to invest in any fancy software or reporting tools--Excel is fine for most situations.

3. Give someone ownership of each KPI

Although several employees might influence a KPI, you should hold a specific person accountable for driving it and reporting on it to the rest of the team or company.

4. Review KPIs on a regular basis

Set the frequency for reviewing these indicators, because the ultimate goal is not only to see if the company is hitting its goals, but also to spot any trends over time and intervene if necessary. Some KPIs, like company profits, might need to be reviewed only quarterly, while new customer acquisition might need daily or weekly reporting.

5. Take action

Over time, your established KPIs will tell you how you're trending so you can act if necessary. Not hitting your sales goal? Send an email marketing campaign or come up with a quickie promotion. On track to hit your goal for app downloads but not quite there on app activations? Look at your in-app experience and consider changes. Sounds obvious, right? But unless you have a clear path of action, all that data gathering and analysis will be all for nothing.

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Last updated: Jul 10, 2014




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