Making KPI's work for your business...

Posted on 6th July 2016 at 4:10pm by Carl Reader in Business, Random Musings

Some of you may have seen my Facebook Live video touching on the difference between leading and lagging KPI's. The problem most businesses have is that they don't think about the logical difference between these types of KPI's, and end up chasing their own tail.

We'll start with a breakdown:

Leading KPI's

These are the ones you can control. It includes activities such as:

  • calls made

  • doors knocked

  • leaflets distributed

It's the initial actions that ultimately lead to a result.

Lagging KPI's

These are the ones that tell you what's happened:

  • sales

  • profit

  • cash in bank

Okay, but I don't want to reach a goal of 75,000 leaflets. I want £50k sales.

None of us want to "achieve" 75,000 leaflets. This is simply the necessary action to get to your sales figure.

Your goal will stay the same.

To manage your business effectively though, there is no point managing the KPI of sales, gross profit margin, etc after the event. By then it's too late, will undoubtedly be off target because of the wrong focus, and you'll be playing catchup.

Instead, you need to do some simple maths:

  • work out your end goal,

  • chunk it back a level or two (i.e. to get £50,000 income I need 50 customers, who come from 150 meetings, which come from 750 conversations)

  • then apply your conversion ratio (every time I deliver 100 leaflets I have one call, on average. If I multiply this by the 750 conversations I want... I know I need to deliver 75,000 leaflets)

It's fairly simple. Work out what you want, track back to what you need to do, and then monitor that.

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