PKF Kerikeri

Key Performance Indicators - What are they?

The better you understand your business the easier it will be to increase profits, create better cash flow and ultimately improve the value of your business.

One of the tools to do just that is developing some Key Performance Indicators (KPI’s).

KPI’s are the key drivers in a business. There should only be 3 to 5 drivers that are fundamental to business success.

Once they have been properly identified, we need to measure them properly and apply strategies and tactics to improve them from where they are now to where they need to be.

KPI’s can be both financial and non-financial.

As an example, financial drivers will generally include the Gross Profit Margin. For most businesses, it’s the Gross Profit that pays all the other costs in the business including the owners' wage or salary, which is usually the last to be paid and the first to be foregone when there’s no cash available.

You can increase sales all you want, but if there is very little or no gross profit, then you are burning a lot of time and resources which could ultimately see a business go under.

An example of a non-financial driver could be customer retention rates. It’s those repeat customers that make up the goodwill of many businesses.

If you understand what the key drivers are, know how to measure them, benchmark what is good, what is not so good, and what needs improvement then we can put a tactical plan in place to improve.

We can help you with all of this.

By regularly measuring the KPI’s you can start to manage improvement and the tactical plan gives you the road map to do it.

Investment working “on your business” and not getting lost “in your business” will make a big difference to both your business and personal life.