Tracking the right KPIs when the goal is growth

By Ian Robertson, sales and marketing director, BrightBridge

Key performance indicators (KPIs) are a vital tool for any business seeking to succeed through expansion. Offering valuable insight into a company’s strengths and weaknesses, they can help identify areas in need of improvement, thus driving strategic growth via informed decision making.

When it comes to the ‘bigger picture’, tracking KPIs can help to promote transparency around how a business functions – on an operational and financial level, and beyond. This article explores KPIs in more depth and highlights the KPIs that businesses should consider tracking when striving for bigger and better things.

Setting KPIs that align with business goals

Though it may seem a daunting task, it’s crucial to align KPIs with goals and objectives from as early on as possible. When setting KPIs, be sure to get down to the specifics; if the goal is to increase revenue for example, then revenue growth would be a KPI to track. If the aim is to improve customer satisfaction, then customer satisfaction would join that list, and so on. Another crucial aspect to consider when selecting KPIs is the unique needs and characteristics of the business. For instance, for a high volume, high-quality manufacturing operation, it’s essential to track KPIs that measure production efficiency and quality, such as machine utilisation, cycle time and scrap rate. Armed with the laser-focused insight gained from KPIs specific to the business, you’ll more than likely start to see progress on the journey to growth.

Financial KPIs

Providing a clear picture of the financial health of a business, financial KPIs can help to facilitate expansion on a grander scale. These include highlighting potential areas of revenue growth, as well as gross margin and operating income. Signalling the increase or decrease in income over time, revenue growth is a good indicator of a business’s success and whether revenue goals are being met. A positive growth rate shows a business is expanding and reaching more customers, while a negative growth rate may indicate the need to re-evaluate strategies.

A gross margin KPI specifies the profit left after deducting the cost of goods sold and provides an accurate indicator of a business’s pricing strategy – and crucially, whether the gross margin targets are being met. A high gross margin would indicate a significant profit for instance, while a low gross margin would suggest re-evaluating the current pricing strategy. Similarly with operating income, this confirms the profit made after deducting all operating expenses, and can help businesses gauge how well they are managing expenses. A high operating income would suggest a more efficient operation in this sense, while a low operating income may result in the subsequent re-evaluation of those expenses.

Operational KPIs

Operational KPIs provide insight into the efficiency and effectiveness of business operations, with a more concrete understanding of how well a business is performing. Regularly monitoring these KPIs is essential for businesses seeking to grow, especially in the fasteners and fixings industry where customers demand high levels of quality and swift delivery times. For this reason, operational KPIs such as inventory turnover, on-time delivery rates, and customer satisfaction, are crucial to track at all times.

A KPI such as inventory turnover for example measures the rate at which an inventory is sold and replaced over a given period, helping a business manage its inventory more effectively. A high inventory turnover indicates efficient selling and restocking, while a low inventory turnover may be due to potential issues with product demand or overstocking. When it comes to exceeding the needs of customers, the on-time delivery rate measures the percentage of orders delivered on or before the promised delivery date. This can prove a key indicator of how well a business is managing logistics, and when acted on successfully can help tackle supplier lead time issues and drive customer satisfaction as a result. As one of the most crucial operational KPIs, customer satisfaction arms businesses with that very knowledge – whether they are meeting the needs and expectations of customers, from providing quality products and services to championing positive customer experiences.