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What is a KPI, Anyway?

William Avila
Sep 28, 2020 5:07:03 PM

What is a KPI Hero

When you run a business, it’s easy to feel like you’re drowning in statistics and metrics. But merely knowing all of these random numbers doesn’t help you. 

If you want to see measurable results for your business, you need certain kinds of numbers--you need Key Performance Indicators.

Key Performance Indicators, also known as KPIs, are the key to keeping your business on the right track. Read on to learn what a KPI is, what kind of companies use them, and how you can benefit from having some of your own.


KPI Chart

KPIs: A Simple Explanation

According to Klipfolio, a KPI “is a measurable value that demonstrates how effectively a company is achieving key business objectives.” 

Essentially, you should be monitoring specific vital metrics that tell you whether or not your team is on track to achieving your goals. KPIs are not the same thing as business metrics because they are specific data points directly related to your core business objectives.

Another essential thing to remember about KPIs--they should always be changing and evolving. You need to update your KPIs regularly or find yourself tracking a metric no longer indicative of your company’s goals.


Benefits of KPIs

KPIs do more than just helping your business stay on track to meet your goals. Here are a few more benefits of tracking your KPIs:

    • Track performance: KPIs help you know which departments and team members are thriving, and which ones need a little direction or encouragement.
    • Evaluate team members: When it comes time for performance reviews, promotions, or raises, KPIs help you know which team members have reached their goals.
    • Get everyone on the same page: KPIs help direct everyone’s attention to shared goals.
    • Data-driven decisions: No more guessing games. KPIs help you quickly make decisions that are backed up by the data.


Who’s Using KPIs?

Any company can use KPIs. From Fortune 500 companies to the mom-and-pop shop down the street--KPIs help businesses of all sizes and types track and meet their goals.

Most businesses have overarching organization goals and KPIs as well as departmental KPIs. Individual employees may even track their own KPIs to monitor their performance.

When you use KPIs at different levels of your organization, it helps you evaluate success and challenges better. Organizational goals help keep the entire company on track, while departmental and individual KPIs break these big goals down into smaller, achievable tasks.


How To Use KPIs: Some Examples

It can seem overwhelming to figure out what KPIs to track and how to use them to monitor your company’s growth. But once you start using KPIs, it quickly becomes clear how helpful they are.

Here are a few examples of how a growing SMB might chart their growth with KPIs.


Profit with coins illustrationRevenue Growth Rate

If you want to know how fast your company is growing, revenue growth rate is a crucial KPI to keep track of. 

Suppose you owned a T-shirt business and wanted to know how much your sales revenue has increased over a certain period (a month, quarter, or year, for example). In that case, all you need to do is subtract your revenue from this period by your income from the previous period. Then divide that number by the first period’s revenue and multiply the result by 100.


(Revenue this period - Revenue earned in the previous period)

-------------------------------------------------------------------------------- x 100

Revenue previous period


So if your revenue from selling T-shirts during the last quarter was $100,000, and you made $175,000 this quarter, you would divide $75,000 by $100,000 and multiply the resulting number by 100. That means your business grew its revenue by 75% in one quarter! Whatever you’re doing to sell those T-shirts, keep it up--it seems to be working.


Conversion Rate Optimization IllustrationConversion Rate

These days, if you want to grow your business, you need to have a killer online presence. However, that can be tougher to track than how many customers come in your store, for example. With the right KPIs to track your digital marketing efforts, you can know where you’re succeeding and underperforming.

Conversion rate is one of the most important KPIs to track when monitoring your online growth.


Let’s say you’re a roofing company, and you have a form on your website for people to fill out and submit for a free estimate. You can track your conversion rate by calculating what percentage of people who visited the page filled out the form. 

If 100 people visited your landing page and 3 of them filled out the form, you would simply divide 12 by 100 and multiply the resulting number by 100 to find the percentage. From this, you’d know that your conversion rate is 3%. That may not sound very high, but studies have found that the average conversion rate for landing pages is 2.35% (Search Engine Land). Of course, different industries have different averages, so that’s important to keep in mind.

By tracking this KPI, you would know that your conversion rate is slightly above average. However, you might want to try tweaking the landing page and form to conduct A/B testing and see if you can improve.

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Build a Strong Reporting Strategy With Rizen

Are you ready to meet and even exceed your company’s goals? Rizen can help you create a strong reporting strategy that tracks and analyzes all the critical KPIs for your business. You’ll never feel like you’re drowning in numbers again. Reach out today to get started!

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