To succeed make the best use of data, SCORE recommends
TO SUCCEED in today’s fast-paced data-driven business environment, you, as a small business owner, should use performance metrics and KPIs (key performance indicators) to guide decisions and sustain growth.
"Verify your key metrics by periodically tracking both individual and aggregate results," recommends SCORE mentor Nabil Freij. "With individual and total metrics, you can identify meeting your revenue goals, see who needs help improving, and learn who is pushing boundaries and raising the bar.
"SCORE (Service Corps of Retired Executives) is a resource partner of the Small Business Administration. Its members work as mentors to America’s small business owners.
Small business metrics can be both qualitative, meaning they are described using words, or quantitative, meaning they are framed as numbers. In some cases, the most specific KPIs and metrics for your business might be a combination of both types of data points.
What is the purpose of this data?
Business metrics and KPIs allow you to measure how well your company is performing against set goals for different areas of your operations, and how you can adjust to exceed expectations. There are metrics available for measuring customer satisfaction, employee retention, and understanding what products are selling the fastest and from what channel.
There are also different ways to develop situational or highly specific KPIs to track cash flow, quality, gross profit, the long-term value of specific customer demographic groups, and many other things. Every area of your business from people to products and processes can be measured, tracked and optimized through the use of data analysis.
"Verify your key metrics by periodically tracking both individual and aggregate results," Freij recommends. "With individual and total metrics, you can identify meeting your revenue goals, see who needs help improving, and learn who is pushing boundaries and raising the bar."
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Sales performance KPIs
To start building a more data-centered organizational culture, you need to start measuring success and qualifying shortcomings. For many small business leadership teams, sales performance metrics are the most logical place to start when looking to build on current success and sustain growth into the future. These metrics could include gross profit, cash flow forecast, inventory turnover and more.
These different indicators can provide actionable insights into the choices your management team should make to optimize successful business outcomes. However, sales performance data is not everything and as your business matures, you will want to consider many other areas as well.
Human capital performance metrics
For many small businesses, one of the single most variable costs is connected to the expense of human capital, or the value of your employees to your business. To develop a better understanding of the costs associated with human capital expenditure, your business may want to track KPIs such as turnover rate and human capital return on investment (HCROI).
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Key logistics KPIs
Small businesses that are involved with e-commerce and are consistently working with shipping partners can benefit from using key performance indicators to evaluate success. Areas such as supply chain management, production, fulfillment and customer service all have metrics associated with them that your business should be tracking. These metrics can include freight cost per unit shipped, transit time to distance, and warehouse space.
Driving successful business outcomes
Measuring success is one of the most important ways for your business to optimize performance and consistently deliver better and more cost-effective operations. In today's challenging business environment, the key to developing the agility needed to sustain success is found in harnessing the full power and potential of data-driven decision making.