Transform Good Business Ideas Into Profitable Ones With KPIs

Every business owner should set goals. Goals give you a clear destination and illustrate your strategy for getting there. They can help you keep track of what is working and what isn’t so that you know when to stop spending time on an idea that isn’t paying off. But not every goal is helpful; the best type of goals are quantifiable (measurable over time). The numbers in KPIs (Key Performance Indicators) tell you how well your company is achieving its objectives. I recommend setting KPIs for key business objectives and measuring how well the company is achieving them: if they’re going up, then things are going well; if they’re not increasing or decreasing at all, then it’s time to change tactics that directly affect the KPIs. 

Take your existing goals and transform them into powerful KPIs you can measure

If you do not have clear, quantifiable goals for your business and want to get started with KPIs, I am going to walk you through three common business goals and how to transform them into quantifiable KPI goals. You can use the process I am going to show you to analyze your goals and make adjustments to them so they are quantifiable KPIs.

KPI’s can help you increase your sales

If you want to increase your revenue from services or product sales, setting goals to increase metrics that are directly correlated to your sales is the smartest way to do it. You will need to know some of your basic sales numbers in order to do this. For example, if you track where your sales are coming from, what your revenue is, you can quantify what each sales source means to your business and set specific goals by sales source. Say you sold 10 shoes and notice that 5 of the sales came from Facebook ads, 1 from Google, 4 from repeat customers; you can set a realistic goal to sell 15 shoes next month by pushing more ads on Facebook and to your repeat customers. So your goals can be to sell 7 from Facebook, 6 from repeat customers, and maybe 2 from google. 

Set a numerical goal for activities that impact your sales

The KPIs related to this goal can be to reach the number of Facebook users you will need to reach to get that many sales with your ads. For example, if you know that 200 people need to see your Facebook ads in order for one person to buy a shoe, then the KPI would be how many views does each ad get. If 100 people saw it and only five bought shoes, then clearly there was something wrong with either the message or where they were seeing it (not enough targeted audience). Tracking this KPI will help you quickly identify when you need to make adjustments to your ads so you can stay on track with your sales goals. It will also protect your profits by keeping you from wasting money on ads that do not work.

KPI’s can help you increase your customer engagement

Customers who engage with a company on social media and via email are more likely to make purchases. If your goal is to get more customers engaged, then setting goals around what proportion of your subscribers will open emails or like posts (and set specific numbers) is the best way to quantify this. You can start by looking at how engaged your customers are now and set a goal to increase it by a specific number or percentage. For example, if you look at your social media engagement over the last year and notice that 1% of your content is getting comments, likes, and shares, analyze what content is performing best and create more content like it. Then set a goal to increase engagement from 1% to 2% and measure how close you get to the goal. Keep analyzing what works and make adjustments to hit your goal, and then set a new goal once you exceed it.

KPI’s can help you increase your productivity

If an employee or department is not as productive as they need to be, setting goals around their progress will motivate them. They know that if they want a bonus for exceeding expectations, then hitting the goal is what it takes, and now tracking those numbers is keeping them accountable. You can set specific numerical goals, for example, for your email marketing team. If you are asking them to complete email tasks without goals, they may not get creative or intentional about the quality of the emails. But say that you told your email marketing team that you expect a 12% or above open rate for emails over the next quarter with a 3% or above click-through rate, they will likely do more than just throw up some copy; they will likely put more efforts into really thinking about what they need to write and how they need to design emails, so they hit the goals you have set. In the end, it will benefit your business because you are sending out emails that people actually want to open, and as a result, they may engage with other parts of your company.

KPIs can help you keep expenses low

You can set numerical goals for activities that impact revenue, and it can keep your costs lower. One area you can use this approach is your ad expense budget. As an example, KPIs related to this goal might be how much money do we spend on Facebook ads or what is our average order value. For example, if you know that your average order is $50 and you spent a total of $500 on Facebook ads in the last quarter, then it makes sense to set a goal for spending less than half of what we spend now (or lower) because otherwise, you are not going to make more money from these customers who have already bought something from you.

KPIs can help you increase your profit margins

Just like you can set KPIs related to expenses, you can also set goals related to profit margins. For example, you can set a goal to increase the customer lifetime value by getting more repeat business from each person who makes a purchase from your ads. You can identify activities that increase repeat business and referrals and set KPIs around that. The email open and click example can help in a scenario like this. If you set a goal to re-market to more customers with emails that have a high rate of opens, you may be able to increase the amount of revenue you get from each customer, on average.

You can set as many KPIs as you like when you understand what makes an impact in your business

For every business, there are KPIs that will help you figure out what your goals should be. If a goal is not measurable, the numbers won’t do any good, and you’ll have no idea how close or far away from achieving them you may be. The KPIs listed in this post can give ideas for ways to set quantifiable goals for any business. For more on KPIs and measuring what matters most, I highly recommend Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs by John Doerr. You can purchase it from my amazon shop page or click here to buy it now. You can also download my free business plan worksheet which will guide you to put together your business plan with KPIs.