If you have ever played a game, be it football or tiddly winks, you will most probably have kept score. The same is not true in many businesses and consequently business struggle and fail to take corrective action quickly enough – because they are often unaware of subtle changes taking place.
There are financial measures and there are non financial measures in every company. It is easy to measure turnover, and cashflow and wages etc. It is not easy to measure and then understand the activities that lead to the turnover, cashflow and wages. And it is this lack of information that leads to many business mistakes.
For example, if business A had a turnover of 100,000 and business B had a turnover of 80,000 we could easily assume that A was a better business. But we cannot tell anything from turnover.
If Business A had a Net Profit of 10,000 and Business B had a Net Profit of 9,000, we would again think that A was a better business.
But what if Business Owner A had to spend 15,000 to get that level of sales while Business Owner B only Spent 1,000
What if Business Sales Manager A required 10 inquiries to get every sales, where Business Sales Manager B only required 2 inquiries.
What is business A had a gross profit of 40% while Business B was making 55% while selling the same product?
What if Business A realised that no enquiry over the past year had come from his website, despite spending thousands on its development?
What if business B realised that 20% of all his enquiries were as a result of one happy customer singing their praises?
What if the receptionist at company A always informed inquiries that they would be called back but never passed the message on?
What if one sales person in the business was visiting 10 customers per day and the 2nd sales person was only visiting 5, struggling but unaware of what they should do?
What if the supplier for company A was actually charging them 5% more than their competitors because he knew he could get away with it?
What if company B had a wage figure which was 15% higher than their immediate counterparts.
Imagine if you had every available piece of information about how well or poorly your business was doing. Would some of your decision have been different and would you have focused more on sales and customers and less on rules and regulations.
We call all of the above Key Performance Indicators (KPI’s). Do you have yours?