There are actually some secrets behind the top businesses that keep them survive and growing: they are actually keep tracking their KPI success and measure it regularly. If you want your business or company performance to achieve massive success, your business must have these fundamental KPIs.
What and how the top businesses measure their fundamental KPI success? And why are these 7 KPIs the most decisive indicator for the future success of your business?
What is KPI?
KPI itself we know stands for key performance indicators – or a series of key performance indicators that are measurable.
Without KPIs that are monitored consistently every week or every month, the performance of a business or company can be ridiculous. Why? Because you never know how far the progress of your business performance. And without this information, you don’t know what improvement steps should be your work priority.
In fact, there are hundreds of types of KPIs that can be formulated in determining the direction of business performance.
In this article, we will explore how to measure the 7 most fundamental KPI for the success of businesses:
- Sales Revenue
- Profit Margin
- Net Promoter Score
- Quality Score
- Innovation Score
- Manager Competency Score
- Employee Satisfaction Score
What are these 7 magic KPIs? Let’s dissect one by one.
Business KPI #1 : Sales Revenue
This is the most fundamental measure of the success of businesses. How much is the sales turnover or sales revenue each year? Is it rising or stagnant?
In various industries in the country, the revenue growth rate that becomes the benchmark standard is around 10%. A business is considered healthy if its sales revenue growth can be double digits, or 10% and above.
A business is considered to have a brilliant performance if its sales revenue can rise above 20% per year or even more. This achievement is usually achieved by new companies that are in the high growth phase. Or by a company entering a new market area.
Business KPI #2 : Profit Margin
High sales revenue can be nonsense if it turns out that the margin is zero, or even minus. So, this second KPI becomes important. What percentage of profit is obtained after deducting various costs. It’s called profit margin.
Each industry has a different profit margin reference. For example, in retail businesses the average profit margin is only around 7%. This means that if the turnover is 1 billion, then the net profit is around 50-70 million only.
On the other hand, in the culinary industry, the profit margin can be around 20%.
For the telco industry, the profit margin is around 25% – a massive margin considering that their sales revenue is already above 100 trillion.
For businesses that sell applications or digital products such as online courses, the profit margin is certainly even greater, it can be around 60% – 70%.
Business KPI #3 : Net Promoter Score (NPS)
This KPI is actually the culmination of a combination of various other KPIs such as customer satisfaction scores, brand image to customer loyalty levels.
The Net Promoter Score (NPS) refers to how high a customer’s desire to recommend the product to his friends or relatives. The number is 1 – 10. The higher it means, the greater the willingness of the customer to do the review and recommend the product or service to all his friends and relatives.
Scientific studies show the NPS KPI is the most crucial indicator for the future of a business. A company that has a high NPS will certainly increase its sales volume in the future, vice versa.
A high NPS score indicates that your customers are satisfied, loyal and at the same time willing to participate in promoting the products or services you sell.
This means that only with the NPS KPI, we actually also summarize other important indicators such as customer satisfaction and loyalty.
Business KPI #4 : Quality Product Score
This is a type of KPI leading indicator that plays a role in achieving the two KPIs we have reviewed above, which are KPI sales revenue and NPS.
This means: if the quality score of our product is really excellent, then the customer will definitely satisfy and recommend the product. This will make the NPS go up. And when the NPS number increases, automatically sales revenue will also increase.
KPI Quality Score can be translated into product defect rate or product reject rate. The lower the number, the better.
Don’t be fooled by the defect rate which is only 1%. Why? For example, an internet service promises 99% reliability. Looks nice. But 1% down in a month is the same as down for 7.2 hours. Take a long time.
Likewise, if a manufacturer makes 1 million units, then 1% damage to goods is equal to 10,000 units damaged. Bankrupt the business.
Ideally, if there is 1 million production, only 100 units will be damaged, or about 0.01%.
Business KPI #5 : Innovation Score
This innovation score refers not only to how many new products were launched (or what new service features were developed). However, it also refers to the number of internal process innovations that have been carried out.
In other words, real innovation is not only related to new products or new features, but also includes new processes developed so that they become more efficient and optimal.
A small example of process innovation: how the employee performance appraisal process can be done through an app on a smartphone screen and no longer use old excel tables or forms. Thus, the process of monitoring the achievement of KPIs is enough through a tap and click on the cellphone screen.
On the other hand, new product or service innovation remains very crucial. Because a business can be confused if it rarely innovates products. Without product innovation, over time the service or product will become increasingly irrelevant to customer interests.
Then slowly, your business can die in agonizing silence.
Business KPI #6 : Manager Competency Score
The competency level of HR, especially those at the team leader level (supervisor/manager/GM) has a very crucial impact on business performance. This is because the team leader will be responsible for building the system and managing the performance of his subordinates.
If the competence of the team leader is trivial, then their business will also be increasingly plunged into the valley of misery.
Therefore, it is important to measure the competency scores of the team leaders in your company. The types of competencies that are measured are not only soft competencies (managerial competencies such as leadership and teamwork skills); but also their level of functional competence related to the technical work they are doing.
Great business is always built by great people.
Business KPI #7 : Employee Job Satisfaction Score
Scientific studies have found an interesting fact: employee satisfaction has a significant impact on future business performance. If the current employee job satisfaction score is good, then the future performance of the business will definitely be good. And vice versa.
The employee job satisfaction (with tens or hundreds of your coworkers) will indeed determine the level of future business performance.
Bottom Line
These KPI metrics act to measure success and ensure the businesses are on the right track in achieving their goals.
It also can be the indicators to find out where the problem lies. This way, you can always highlight which areas that need the improvement for your business.
Further Reading:
The Importance of Employee Training in Your Business Organization
The Process Business Strategic Planning Before Starting Any Startup
