What is a Key Performance Indicator?
A Key Performance Indicator is a value that you can quantify and it demonstrates how effectively an organization is achieving major business goals. Companies use KPIs at multiple levels to determine goal success.
Understanding How to Define KPIs is Crucial to Business Success
Today we’re going to dig even deeper into KPIs, or key performance indicators. They are the things that you need to track in your basis on a daily, weekly, and monthly basis to take your business to the next level. This is the seventh biggest mistake that entrepreneurs make.
Now, I know we’ve talked about this before. But I want you to realize that what we’re going to do today is we’re going to dig a little bit deeper into it, and the seventh biggest mistake that entrepreneurs make is that they do not track key performance indicators for their business.
Now not too long ago I talked to you about types of KPIs and I even talked to you about a concept of setting up your business so that you can actually run it from an island and have this dashboard that gives you the most critical pieces of information. Yet I’ve been coaching some of my clients, and I’ve been talking to a lot of the listeners for this podcast, and what I’m finding is many of you are having a difficult time figuring out what your KPIs might be.
Defining KPIs for Doctors and Lawyers
For example, I was just speaking to a good friend of mine who’s a doctor, and she said, “Well, I get this whole KPI dashboard thing, but what are my KPIs?” Well, if you’re a doctor, one of your KPIs could very simply be the number of patients you see on a day-to-day basis, right?
Now, depending on the type of medicine that you practice, often for most doctors in order for them to provide the best type of care for people and also to generate more revenue for themselves as a business. It’s important that they have follow-up visits with patients or that the patients, for example. It’s also important they purchase certain creams or medicines that they have to offer, or that the patients go for certain treatments that they have.
But it’s not in every case that the patients are just going to say, “Yeah, this is good for my health. Let’s do it.” Often they don’t. So one of your KPIs then could be to track not only how many patients are you seeing on a day-to-day basis. You can also track, for example, of the people who came in to see you, and how many opted for the next step in their treatment.
Now, if someone has a type of treatment where there is no next step, well, you just cancel that number out and you ignore that one. But if people are coming in and you’re seeing 100 patients in a day or 50 patients or 20 patients in a day, how many of those 20 patients are then opting in for the next level of service that they’re supposed to get, whether there’s another patient visit or maybe it’s some sort of a treatment that you’re supposed to do for them or something that they purchased that they utilize. Whatever that next step is, you want to track that, and those are the kinds of KPIs that a doctor might have.
For a lawyer, your KPIs might be simply billable hours. That’s a very important key performance indicator. Another key performance indicator would be on a larger scale how you’re doing for your clients, right? Now, if you’re doing contracts or something like that, maybe it’s a little different. But if you’re in litigation or you’re getting involved in any of those types of things, you know, keeping a winning percentage for yourself.
How often are you getting clients the results that they’re looking for, right? Those kinds of things are all the different types of KPIs that you can track.
Defining KPIs for a Hairstylist
In fact, let’s take a very simple business. If you have a hair salon, would you believe that most hair salons don’t take the time to schedule people for their next hair appointment when they’re coming in to have a hair appointment?
So a very important key performance indicator for a hair salon or for a hairstylist would be number one, how many people are you seeing today, right?
Number two, how many of those people are you booking for your next appointment while they’re standing in front of you today? Yes, I know they’ll come back and see you. Yes, I know they can always call you, and people don’t always know their calendars in advance. But what if you got them to book it right then and there? In fact, offered some sort of a discount if they book their next service with you right there?
Most people are much more likely to come to see you when you do that.
The Process for Defining Your Key Performance Indicators Applies to Every Business
This also applies to dentists. This applies for any type of service that sort of is optional and people want to do it, but they just sort of forget about it and it might take an extra month or two. But if you think about it as a hairstylist, if someone is coming back to see you let’s say every two months, as opposed to every three months, that makes a massive difference in your bottom line, and it also makes a massive difference in the way that their hair looks.
Now, I don’t have the time to go through every single business here with you. But as a CEO, you must have key performance indicators, because your key performance indicators are those things that are going to keep you on track on a day-to-day basis. They are the things that are going to tell you when you’re doing things right and when you’re doing things wrong.
You Need to Track KPIs for Your Employees
Now, key performance indicators in your business are not just for you; they’re for all the people that you manage. So for the people you have at your front desk, maybe you should do some sort of a customer survey to see how they’re doing with your clients, right? If you have people answering the phones, the same thing. Maybe you do some sort of a survey. Do you have key performance indicators to see how they’re performing at the most important things they’re supposed to do?
If you have a business that generates leads and calls come in, you need to track how many calls a day are coming in and how many of those calls are actually being converted into appointments or sales or presentations or whatever it is that you do. Certainly, if you’re a salesperson, as you know, you must have a KPI dashboard where you are tracking your key performance indicators and you’re keeping an eye on all your sales funnel numbers. Now, I talked about that so much; I’m not going to go into it any more today.
But what I want you to understand as part of this in your business is you must track your key performance indicators, and those indicators are going to be different for every company, and that’s part of what makes this so difficult.
As I’m trying to reach out to you over this audio recording and I’m trying to get you to understand what’s important in your business, I can’t literally sit here and go through every different type of business that’s out there.
What are Your 3 Most Important KPIs?
But what I want you to do right now is start thinking. What about two or three things – the three most important things in your business – that if you were to consistently do the right way, you would get better results for your bottom line. Think of what some of those things might be and consider what are the things today that if I started doing better today as a business, right?
Anything in your business, what’s something that if I did better today as a business owner, my business would get better. We would make more money, we would spend less money, our expenses would go down or our revenue would go up. What are one or two or three of those things? If you just start there, that’s all you need.
Some KPIs are Easier to Quantify Than Others
Now, sometimes you’re going to come up with something and it’s going to be hard to quantify. For example, you’re going to say, “Well, we want to have customer service.” So how do you quantify that? That’s easy; you just think of a way that you can put a number on it.
For customer service, it turns out the answer is doing surveys. You do a simple survey where you ask your clients for example, “Would you refer us to a friend?” By the way, some companies do a survey and that’s literally the only question that they ask on their survey. They don’t ask, “What did you think of our service? How would you rate us on this? How would you rate us on that?” Because at the end of the day, a satisfied customer – a raving fan – will refer you to other people.
If they’re not willing to refer you to other people, then guess what? They are not a raving fan of your company, and in my opinion, then, they are not the type of satisfied customer you want to have. So that can become a KPI. What percentage of your clients, when called back a day later, an hour later, a month later, or when given an email to fill out or something – some survey – how many of them would say they would refer you to a friend? That could be a brilliant KPI for many people.
How to Measure KPI?
But there are all kinds of KPIs. If you’re in the Search Engine Optimization business like my marketing company, one of the key performance indicators we track is how much traffic are each of our clients getting to their website? Because if on a monthly basis we are not massively increasing the number of people that go to a client’s website, we are not doing our jobs, right? It’s that simple.
And by the way, if you’ve got an SEO company or marketing company and they’re not tracking that for you and they’re not giving those numbers to you, and they’re telling you that that’s not important, then trust me, they’re not doing their job because one of the most important key performance indicators is that.
Now, what else is a great key performance indicator? Well, it’s one thing to send traffic to your site, but how many leads are you getting from that and how many of those leads are qualified?
Document Three Critical KPIs to Track on a Daily, Weekly, and Monthly Basis
All these things are key performance indicators. I can go on and on. I can give you a thousand different examples, but what I would rather you do is this: right now, what I want you to do is I want you to go down and document three things within your business that if you track on a daily, weekly, and monthly basis, it would massively improve your business. But what I want you to understand with key performance indicators, it’s not just a matter of making a list of the things that you’d like to track. It’s a matter of actually doing it.
Analyzing KPIs Allows You to Discover the Root Cause of Problems
Now, so many people start doing this but then they stop. One reason they stop is that it’s just a lot of work to do. Another reason that they stop is they start looking at the numbers and the numbers don’t look so good, and so what they’d rather do is cover up their ears and do “Lalalalalala.”
Well, I don’t want you to be the kind of person who runs your business that way. I want you to look at the numbers. If the numbers are good, great. Celebrate. If the numbers are not good, let’s find out what’s going on. Let’s get to the root cause of the problem, and address it.
If you’re an attorney and you want to be billing 25 hours a week but you’re only billing 15 hours a week, don’t hide from that. Don’t lie to yourself. Admit to yourself that you’re not billing enough, right? Or if you take a couple of vacations or if you take a couple of long weekends or there are holidays and you end up not working as many hours, well you have to be honest with yourself, and every week look at how many hours you’re actually billing.
If you’re a doctor and you’re not seeing enough patients, or of the patients that are coming in, you’re being selfish and not offering them all the treatments that are available for them, because somehow in your mind you think that by not offering those things to them, you’re doing them a favor because some of those services are possibly expensive. Well look, as a doctor, your responsibility is to offer those services to them. It is your responsibility to get them to take that next step.
Understand What Your KPIs are for Each Stage of Your Sales Funnel
As a salesperson, it is your responsibility to sell the services that you offer, right? I put on these business coaching seminars, for example, and I have salespeople who sell tickets to this thing. And it’s amazing; when they get on the phone with a businessperson and let’s say they’re selling a ticket to this event, if that person gets off the phone without purchasing a ticket, there’s a very high likelihood that that person’s business could fail, or worse.
It might not fail, but they might live the next 10, 20, 30 years of their lives having a business that doesn’t succeed. So it’s my salespeople’s responsibility to sell that ticket and get the people to that event, because when they come – let me tell you, we have a 100 percent money back guarantee. Anybody who comes to our events, if they’re not 100 percent satisfied with it, they can get 100 percent of their money back. And you know what? We’ve never given a single refund.
Why? Because when people come, they understand that there’s a ton of value that this thing has, right.
But the thing is as a salesperson; you might forget that. So it’s important for the salesperson to have key performance indicators. What percentage of the people that he or she is calling is converting into a ticket sale, right?
And then for me, it’s of those people who come to that event, how many of them do we get results in? How many of them would refer us to a friend? It’s that sort of thing that works and in every single business you can imagine, there are key performance indicators. So find out what your top three key performance indicators are today.
If you’re one of those people who wants to go over the top, go for four or five, but you don’t really need that many. Get two or three. If you get three, I will be incredibly happy. So then get those three right now and figure out what are the three most important things in your business, and starting today, I want you to start tracking those things. And if it’s going to take some work to track those things, you’ve got to get started on figuring that out right now.
Importance of Key Performance Indicators
So get out there, let’s start tracking your KPIs, and this ends the seven biggest mistakes that entrepreneurs make, and as I say, this is the one thing I purposely left out of my book, The Business Bible, so you can’t get it there. So this is it: I want you to go back. I would highly recommend you go back and listen to these seven episodes, and certainly if you’ve missed any of them, please go back and make sure you listen to it.
But these seven episodes are incredibly powerful, because they give you the seven biggest mistakes that I’ve seen over and over again by many business people in many different industries, and it’s amazing how it doesn’t matter if you’re a salesperson, you’re a doctor, you’re a lawyer, you’re an engineer.
Whatever you do, it’s so incredibly common for people to make these mistakes. So get out there, listen to these things, make sure that you apply these lessons in your business, and I guarantee you you’re going to see results in your business like you’ve never seen before.
Hey, I love you all and as always when you’re in your business, in your personal life, whatever you’re doing, always please lead with your heart.