KPI: know the management indicators and grow the performance of your business!

KPIs, or Key Performance Indicators, are management tools that measure the performance of all sectors of the business. This type of action is fundamental to analyzing the progress of activities and planning the appropriate corrections that compromise the success of a company.

A manager is responsible for establishing goals and objectives for a short and long-term business and, for this function, it is necessary to make a strategic plan that uses the available resources in an efficient way and that results in increased productivity.

Knowing this, to help you in this process, we will deal with the following topics:

• What is KPI?
• What are the types of KPIs?
• What is the difference between KPI and Metric?
• KPI indicators
• 4 main KPI metrics for any type of business

What is KPI?

KPIs are management tools whose function is to measure the performance and success of a company, website, team, or even a person. In addition, indicators are important to help you stay focused and not get lost in decision-making.

The objective of a KPI is to show everything about the influence of its actions on a company and, from this analysis, draw a direction for action.

In an analysis of metrics, it is essential to know how to distinguish which ones are relevant to your business, because not every metric is a KPI. A metric becomes a KPI when it is essential for the analysis of your business.

An important step in the evaluation of metrics is to "evaluate and reevaluate", that is: it is necessary to understand how well a strategy is working, making comparisons between metrics chosen as a reference and the new metrics obtained after an improvement action.

However, several types of tools can be used to measure the performance index, and each is relevant to a particular type of business.

To evaluate the relevance of a KPI, we have the SMART formula, an acronym that means:

S - Specific

A goal must be specific. It is necessary that all those responsible for its elaboration have full knowledge about what will be worked on and know how to define it clearly and objectively.

Do you think that "increasing revenue" is a good goal? Maybe a good objective, but not a goal. Because, as we defined earlier, a goal is an association of qualitative and quantitative aspects!

Therefore, making a goal to increase revenue by itself does not make sense. It is necessary to add numerical factors capable of giving greater accuracy to what you want to achieve.

In addition, a specific goal takes into account several factors, including:

• Who will be responsible for making this increase?
• How will it be done?
• Why it should be done?
• Where will it happen?

M - Measurable

The quantitative aspects are used for comparison, evaluation, and monitoring of the goal. In this way, it is essential that it is measurable.

As an example, let's assume that we want to increase the number of sales of a company by 19% in the 4-month period.

Without specifying the value of the desired increase and the period of time to fulfill it, it would not be possible to monitor the goal and not even know if it was it can be met or not.

A - Achievable

A goal needs to be able. Although it is obvious, it turns out that many companies do not define their goals well because they are unaware of their real potential.

Setting a goal that cannot be achieved is a very serious and extremely disadvantageous mistake for a company because it discourages the group.

It becomes frustrating to work for months, drawing up strategies by elaborating action plans, mobilizing the team, and never achieving the results that the manager stipulated.

Therefore, the elaboration of a goal needs to take into account the historical data of the company. You need to know where this organization has already arrived to define where it can go.

It is also necessary to align with the work team on the defined values and deadlines. If it is possible to achieve the established goal, based on all the knowledge and qualifications that the team has, the goal is appropriate, On the contrary, it is necessary to review it.

R - Relevant

After defining a capable goal and mobilizing the entire planning team, it is necessary to analyze its relevance to the business.

A relevant goal is one that directly impacts the business and generates a strictly positive return for a company. Therefore, it needs to be justifiable and contribute to the growth and evolution of the enterprise.

Among some of the indicators that should be analyzed to help define relevant goals are the number of customers registered in the database, amount of sales, cost of customer acquisition (CAC) and profit generated.

T - Timebound

It is not possible to set an achievable goal without establishing a period of time to meet it.

As we saw in the measurement phase and goal concept, it is necessary that there is a deadline for all tasks to be fulfilled.

Time is a decisive factor for a company, so it needs to know how to manage it very well. A goal without a deadline would be catastrophic for your coffers. Remember the popular saying: "Time is money".

What are the types of KPIs?

There are two types of KPIs: volume metrics and efficiency metrics.

The first presents its results in absolute values while the second is measured in percentage.

These two metrics should be analyzed together because an individual analysis of each type will have a great chance of error at the time of interpretation.

When you have a website and make an improvement in page loading time, for example, and then you notice an increase in the number of visits, analyzing only the volume metric, you should not conclude that there is a direct correlation between these two factors.

There are several actions that can impact the sale of your products or services, but to make sure that you are on the right track, a complete analysis is required.

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When we talk about projects, we think about something of great magnitude. This is a mistake, because a project may be involved with small day-to-day activities. We can cite some examples in solving internal problems, negotiating with suppliers, delivering products, implementing systems and strategies. The correct management of the projects brings benefits to the organization, being able to be used in problem-solving. Good project management defines precisely the decision-making processes and also identify causes and effects.

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What is the difference between KPI and Metric?

Many people confuse the concept of KPI and metric and do not know how to differentiate the two. This is because a metric can become a KPI depending on the relevance it presents to your business.

We can describe a metric as a simple analysis with raw and objective data, different from KPIs, which can be composed of several metrics or built from a specific metric for evaluation.

More specifically, a metric can be considered an analysis that is usually not associated with a conversion metric. KPIs, on the other hand, are directly related to a metric that seeks lead conversion.

An example of a metric can be the number of hits on your site, on social networks, or even the bounce rate of your product or service.

An example of KPI can be the conversion rate of customers, user stay rate on your site, and even the company's profit.

Next, we will know the performance indicators of the KPI and how they are divided into results indicators.

5 KPI Indicators

Key performance indicators can be used anywhere in the process to measure your result. The indicators are:

1. Quality indicators

This indicator is used to determine the quality of the product that should be offered to the public, the ideal is that the product or service offered is perfect.

2. Productivity indicators

This indicator will relate the results of an activity or work in a given period of time to the resources consumed.

It is an indicator that does not necessarily need to be related to materials, it can measure the performance of one worker in relation to another, for example.

3. Effectiveness indicators:

Unlike those already discussed and as the name already exemplifies, it identifies efficiency with the effectiveness of products or services.

4. Capacity indicators

This indicator shows the ability to result in the process, in a given period of time, analyzing inputs and outputs.

5. Strategic indicators

Finally, we have indicators that inform how much the organization is in the right direction of its objectives.

In addition, they transmit performance in relation to the decisive success factors.

4 main KPI metrics for any type of business

First, it is important to emphasize that each type of business has a different need, and with this, a metric that is highly recommended and useful for one company may not be relevant to another.

However, there are metrics that are broader and capture information that is usual for any company. They are:

1. Proceeds

Revenue shows how much money is entered through the sale of financial products, services, or applications.

This analysis ensures a comparison with market averages and you will know if you need to invest more in a particular sector. Therefore, knowing how much revenue your company generates is very important for an evaluation of your business, service, or product.

How to calculate: add all the billing you had within the analyzed period.

2. Ticket

The average ticket is the average amount spent by each customer in your company. This indicator is important, as it will show you if your customers continue to purchase products or services from your company.

The higher the value of your average ticket, the greater the satisfaction of your customers in relation to your product or service.

How to calculate: total sales value of the period / total sales.

3. ROI

ROI or Return On Investment is an indicator that evaluates the return on each investment made.

By calculating this indicator, you can see which investments are generating a return and whether you are losing or earning money.

How to calculate: revenues - costs / costs.

4. Profitability

The idea of profit refers to the portion that the company receives from billing after the costs are discounted. Profitability, on the other hand, refers to a percentage value that shows the profitability of the business, from a view of how much your revenue is able to offer a return.

When a company has high profitability, this implies saying that the return of its business is high and that the efforts submitted for this are working.

How to calculate: net profit / total revenue*100.

Develop your skills!

With this kit you will receive 3 templates to

analyse and present the KPI's from your company.

See below which presentation templates

are included in this kit.