How to use KPIs to increase profit, cashflow and business value

The better you understand your business, the easier it will be to increase your profits and free up your cashflow

As a business owner, you must understand which Key Performance Indicators (KPIs) are critical to your business. These are the critical success factors that drive profit, cashflow and business value and are used to measure the efficiency of different business activities.

Do you regularly monitor your KPIs to ensure continuous improvement? Are you measuring the KPIs which have the greatest impact on your business? Have you set targets to improve them?

Making small changes to improve these key drivers can have a huge impact on the success of your business.

There are three stages to KPI improvement:

1. Establishing your critical KPIs.

We recommend choosing five KPIs that will have the biggest impact on your business and directly relate to your business goals. These may be financial or non-financial.

It’s likely you’ll have at least one KPI relating to your customers and one relating to your team. Be selective; there are literally hundreds, and just because you can measure something doesn’t mean you should measure it.

2. Measure them.

Your KPIs must be relatively easy to measure and you must monitor them regularly. The more often you review your KPIs against your target, the sooner you can respond to any dips or abnormalities. Where possible, automate this process and remember measurements should be accurate, not perfect.

3. Improve them.

Review your current results, then identify realistic improvement targets. These improvements should reflect your budget or forecast. Then, determine the processes you need to implement or streamline to make these targets a reality. These targets will set expectations for the performance levels in your business.

Not sure which KPIs you should measure to make the biggest difference to your business? Not only can we help you establish them, we can help you implement a tactical plan covering the business processes and behavioural changes required to drive your KPIs in the right direction.

“Not everything that can be counted counts, and not everything that counts can be counted.” -Albert Einstein