We’re big fans of KPIs or Key Performance Indicators here at Think Forwards, we think its important that every business is able to measure how effectively it is achieving its goals and objectives. The list of KPI’s is pretty endless, but we thought we would talk about five of our favourites
1. Revenue – also known as Turnover or Sales and usually reported net of any sales tax (e.g. VAT). Often a good indication of the size of the business, trends in revenue will help you understand growth. Its an easy, simple metric to understand and track and a great place to start. But beware the saying “Revenue is vanity, profit is sanity, cash is reality” and make sure you also have some other KPIs in place!
2. Net Profit – also known as the bottom line, net income or net earnings; this is the actual profit left after you have taken away ALL expenses from revenue. This is a good indicator of the financial health of a business.
3. Customer churn rate – the rate at which you are acquiring new customers vs losing them. It’s generally harder to obtain a new customer rather than retain one, tracking this metric over time will also give your business a good indication of how well you are looking after your customers.
4. Net promoter score – when was the last time you asked your customers for feedback? Well, here’s your chance to start. This metric looks at whether your customers will recommend your products or services to others. A great one to track over time and begin to understand what actions you can take to improve it.
5. Customer or product profitability – this is probably the most complicated of our five favourites as you need to have some good data capture processes in place to ensure you can accurately calculate this. Even many large organisations find this one a challenge! Once you’ve got it nailed, visibility can create huge value for your organisation as you begin to understand who or what creates the most value for your business.