1. Identifying what you want to measure
The first step in developing meaningful KPIs is understanding what you are trying to measure, for example the business’s strategic priorities or key operational aspects of the business. Your KPIs should be reflective of the business in order to provide relevant information that can be used to assess performance. A good place to start when identifying the measures that matter is with the question, ‘What criteria is important in achieving success?’
2. Assign achievable targets to each KPI
Assigning a target to each KPI is also called defining the KPI. This is important as it gives you and your team a goal to reach and ensures everyone understands what’s expected. These targets need to be achievable – if they are unrealistic, it can be demotivating when you don’t reach these goals. To help define your KPI targets, look to market research and your sales growth history.
3. Set a timeframe for each KPI
Setting a timeframe for each KPI ensures you’re tracking your KPIs regularly and allows for better evaluation. Comparing periodically enables you to identify profitable times and external factors that might impact on sales. For example, when seetting timeframes for sales growth KPIs, these could be set quarterly so that you’re keeping a record of revenue and sales growth for each quarter. You can then compare these quarters year-on-year to explore and identify trends.
4. Evaluate and update your KPIs
Tracking KPIs means you can evaluate their effectiveness and change them when necessary. If you exceed a target over and over for example, this might tell you that you need to increase taregts as you’ve may have set the goal too low. Conversely, you might be underperforming each quarter which might tell you that you’ve been too ambitious with your target.