Every business owner should take the time to analyse their organisation’s performance metrics. Even if you’re working under a franchise brand, you should still be continually monitoring progress. Here’s how to measure success.
Keeping an eye on performance metrics - or key performance indicators (KPIs) - will help you understand how your business is developing, and give you the insight to grow efficiently. If you’re a franchisee, you’ll be able to share this information with your franchisor, so they can support you to improve your unit further.
According to Geckoboard, more than a third of SMEs don’t reach their yearly growth targets. But almost three quarters (74 percent) of businesses monitoring KPIs in real time do achieve their goals. If this statistic isn’t persuasive enough, here are some more reasons why you should be making time for performance metrics.
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The benefits of analysing performance metrics
Without consistently monitoring your business’s performance, you can only make an educated guess as to whether it’s in good shape. KPIs can help you make sense of your progress and work out whether you’re meeting your financial targets and set to achieve your long-term goals.
1. You can measure your progress
KPIs aren’t goals - they’re the measurement of your goals. For example, you might choose to look at how close you came to reaching a monthly sales target. If you had aimed to sell 100 products and you only managed to sell 60, you know immediately there’s an issue. Measuring goals allows you to identify where things are going wrong and make decisions to get back on track.
2. You can learn from your mistakes
Once you’ve made a change to combat the issues you’ve discovered through KPIs, you’ll have greater knowledge and experience as a business owner.
If you’re also a franchisee, measuring targets should give you the insight to initiate helpful conversations with your franchisor. When you become aware of poor performance, you have the chance to learn from the franchisor's expertise.
Chances are, your franchisor will have encountered the issue before and will be able to help you improve the situation. This wealth of experience is one of the biggest advantages of investing in a franchise system. Rather than reinventing the wheel, you can learn from the obstacles your franchisor has previously overcome.
3. You can motivate your team
If you manage a team of employees, measuring KPIs can be a great way to engender a culture of performance improvement and increase job satisfaction.
Employers who don’t use metrics may only get feedback on targets and performance quarterly or annually. But if you’re able to measure results more regularly, you can reward employees as and when they're achieving their targets. This ‘real-time' feedback can be incredibly motivating, and prompt employees to keep pushing forward at all times.
What exactly are key performance indicators?
Business performance metrics or KPIs might sound like jargon, but they’re crucial to growth. They help you identify which factors are important to franchise success and then measure them to work out how it’s progressing over time.
Performance metrics could take the form of sales volumes, profits or costs. Although the majority of KPIs are numerical, some businesses use ‘softer’ metrics. Depending on the nature of your organisation, you might try to measure customer satisfaction or social media engagement.
18 business performance metrics you should consider using
- Revenue/profit - This metric is probably the most important one and should, of course, increase as you develop your business.
- Revenue/profit per employee - By calculating how much money the average employee brings into your company, you can track whether they grow in value over time.
- Cash flow - Your revenue doesn’t take into account non-liquid assets like stock, and won’t tell you whether you have enough money to survive an emergency. So, it’s important to measure cash flow as a key performance metric.
- Forecast vs. actual - Comparing your financial situation to your original budget can be incredibly useful when it comes to planning for the future.
- Sales growth month/year-to-date - If you’d like to know how your business has performed since the start of the month or year, you can use this KPI to find out. You won’t have to wait until the end of the year - plus, you can isolate certain months to see how performance is affected by the seasons.
- Sales by region - Once you know where most of your customers are based, you can initiate a marketing campaign to target less profitable areas.
- Number of customers - Like revenue and profit, this KPI should form a crucial part of your growth analysis. You’ll need to work out how many unique customers are buying your products within a given time frame.
- Customer acquisition cost - How much does your business spend on each new customer to make a purchase? Ideally, this figure will decrease over time.
- Expenses per customer - Like the metric above, this approach takes your outgoings and customer numbers. But here, you measure expenses on an ongoing basis.
- Customer loyalty - Your number of repeat purchases will depend on your business; an estate agency will see far fewer return customers than a gym, for example. But you can use this metric to track your franchise success over the years.
- Customer satisfaction/net promoter score - Use surveys or feedback forms to find out how happy your customers are with your service and whether they’d recommend it to friends and family.
- Percentage of complaints/returns - Although this might not be the most satisfying metric to calculate, it’ll tell you whether you’re improving your offering over time.
- Employee retention - If the average length of time workers spend at your company is getting shorter, you can take steps to improve your employee onboarding, wellbeing and benefits schemes.
- Job vacancy response - How many people apply to jobs you advertise? This figure should rise as you develop your business and make it a more attractive prospect for workers.
- Employee satisfaction - Just as you would with customers, you can use surveys or questionnaires to gauge how happy your workers are. You could also discuss employee satisfaction during annual reviews.
- Website traffic - Gather analytical data to see how people engage with your business online. You could measure how many unique visitors your website attracts every month, and how long the average person stays on each page.
- Marketing channel leads - This performance metric will tell you the platforms where you should be investing the most money. For instance, do you get more sales through your website, emails, social media posts or pay-per-click advertising?
- Innovation spending - You should aim to put more money toward market research and new products and services as your business develops.
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Alice Tuffery, Point Franchise ©