You likely already know that you need to be tracking key performance indicators to help your business do well over time. But when you own a small business, there are plenty of details to keep track of, and it’s easy to put KPI tracking on the back burners.
Still, keeping track of them can help you improve operations without getting overwhelmed by too many details.
Choosing KPIs and Gaining Visibility
There is no one set of key performance indicators that everyone will benefit from tracking. The things you will want to look at will depend on your goals, stage of your business, and the industry you are in. You can’t track every single KPI because that would be too time-consuming, and it would cause you to lose sight of what is most important.
However, one area you may want to pay close attention to is your fleet because of how important it is to business operations. A tool that can help you gain visibility into your fleet is a network video recorder camera system. An NVR camera system helps you see how a site is operating, and it can help you make operations more efficient and safer. If you are interested in using an NVR camera system, you can review a guide on the things you should look for when purchasing one.
Consider Cash Flow
Cash flow forecasts are important because they can help your company determine whether you have appropriate profit and sales margins. This is a great starting point because it’s something every business needs to understand. First, you will want to estimate the number of sales you expect to receive so you can predict how much cash might be coming every month. You can then calculate any outstanding sales and how long it usually takes before a customer pays.
You can then estimate any expenses each month that will cut into your profits. Subtract your expenses from your profits to determine the projected cash flow for this month. Performing these forecasts on a regular basis will help you catch any issues early on so you can adjust as needed. These forecasts are helpful because they can help you determine if you are likely to have any shortages or surpluses.
Customer Retention Rates
Retaining current customers is much more cost-effective than attracting new ones after losing old ones. Understanding churn rate will help you see how often you are losing current customers and gaining new ones so you can figure out if your marketing strategies are working well. Keep track of customer retention and how often customers are coming back after they make purchases.
Drop-Off Rate for Your Funnel
The drop-off rate for your sales funnel helps you see how many customers are abandoning the conversion process before they complete the sales. First, you will want to see how many initiate the process to begin with. You can then subtract the people who complete the final step to find how many have abandoned the funnel. Divide that number by the total number of initiators to find the total percentage of visitors who have dropped off.
Determining how many people abandon the process and at what stage allows you to determine problems in your sales funnels and make the required adjustments to boost your sales. As more and more small businesses rely on the internet to bring in sales, the drop-off rate has increasingly become one of the most important KPIs.
Turnover of Inventory
Measuring this indicator can help you determine how many units you have sold in a certain period of time. This metric will help you see how well you are moving inventory and what you can do about it. If the turnover is too fast, you may not have enough inventory, or it may mean your sales are doing well.
On the other hand, a slow turnover rate may mean you have too much inventory or are experiencing a time of slow sales. Understanding how well your inventory is moving will help you determine how much marketing and purchasing need to happen, and it will help you make better decisions about pricing.
Relative Market Share Metrics
Understanding this indicator will help you determine how much of the market you control. The relative market share will help you determine how well you are performing compared to others doing similar business. If you know you have a relatively small share of the market and have a small increase in profits, it might not be as critical as if you had a larger share of the market.
The first step in finding this metric is to research the competition. Doing a competitive analysis will help you figure out who your competitors are and what their revenue and sales are like. You can then divide your sales by the competitor’s sales.
