What is a KPI in Simple Terms?

Key performance indicators

KPI or “key performance indicator”, is an excellent way for business owners to measure their progress and make better decisions. KPIs provide strategic insights that help the business owner move forward at a vital level, whether it’s finance or marketing related!

So what are KPIs?

Well, first of all, they’re not just for big corporations! There is an old saying that goes: “If it doesn’t get measured, it doesn’t get managed” – meaning if we can’t see how our business measures up on specific performance indicators (KPIs), then there will be no way to know whether objectives have been met or problems spotted early. So think about this as a measuring tool; use these terms wisely and put them into practice to help improve your business!

Now that we know what a KPI is, let’s take a look at some common examples to get a better understanding of how they can be used:

– Sales conversion rate: How many potential customers can you turn into paying customers? This will help you gauge your sales team’s effectiveness and marketing campaigns.

– Customer satisfaction rate: How happy are your customers with your product or service? This can be determined through surveys and customer feedback.

– Employee turnover rate: What percentage of employees leave your company within a specific period? This will help you gauge how well your company is doing in terms of retention and employee satisfaction.

– Website traffic: How many people are visiting your website on a daily or monthly basis? This will give you an idea of how well your site performs regarding search engine optimization and online visibility.

– Social media engagement: How often are people interacting with your brand on social media? This will give you an idea of how well your social media marketing campaigns perform.

There are endless possibilities when choosing KPIs, so choosing ones relevant to your specific business goals is essential. The most important thing is to ensure that you’re consistently tracking and monitoring your KPIs to make necessary adjustments along the way.

Now that we’ve gone over what a KPI is and some common examples, it’s time to put this knowledge into practice!

Here are a few tips on how to get started:

– Choose KPIs relevant to your business goals: As we mentioned, there are endless possibilities when choosing KPIs. However, it’s essential to make sure you choose relevant ones for your specific business goals. Otherwise, you won’t be able to track and monitor your progress properly.

– Make sure you’re tracking and monitoring your KPIs consistently: To make the most out of them, you must follow and watch them regularly. This way, you’ll be able to spot any trends or changes that might be occurring.

– Use your KPIs to make necessary adjustments: After tracking and monitoring your KPIs for a while, you should start to see some patterns emerge. If you see something that isn’t quite working, don’t be afraid to make the necessary adjustments. After all, that’s what KPIs are for!

By following these tips, you should be well on understanding and utilizing KPIs in no time. Remember to be patient and consistent, and you’ll be reaping the benefits of using KPIs in no time!

Pro Tip: For you to make accurate decisions based on your KPIs, it’s paramount to understand that the data you need to determine your KPI has to be accurate and up to date. If you are not sure about this, then your first order of business should be to resolve this.

Data from the Bureau of Labor Statistics (BLS) shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first ten years. Only 25% of new businesses make it to 15 years or more.

How many of these businesses do you think looked at their KPIs, How many of these businesses used KPIs, but the data to determine the KPI is not up to date or correct? Why is that? Do you believe that the success rate would be higher if these businesses had been watching their KPI? Better question yet, how many of you are reading this article and know your balance sheet has not been reconciled in months?

Let me be very honest: these business owners didn’t plan to fail, but most failed to plan.

Where do KPIs fit into my business?

In the forthcoming article, we will look at various KPIs to better understand this. I will discuss them using a top-down analysis. I want to do it this way so that you, the reader, can better understand where each of these KPIs fits in your business.

So let’s start with what I like to call the four pillars of any business.

  1. Finance
  2. Operations
  3. Marketing and Sales
  4. Human Resources

Each of these four pillars must be synchronized to run any business successfully. Let me explain what I mean by this.

I will use a restaurant as an example to make this point. If the business’s finances are not in order, meaning you don’t have enough working capital to pay your day-to-day expenses, then it doesn’t matter how good your food is or how pleasant the restaurant atmosphere is. Eventually, you will have to close your doors.

On the other hand, let’s say that the business’s finance is in good shape, but your operations are not. This can be for various reasons, but let’s say that the food takes too long to come out of the kitchen or it’s not coming out at the correct temperature. In this case, no matter how good your food is, people will not come back because the slow service will turn them off.

As you can see, in both of these cases, it doesn’t matter how good one pillar is if the others are not running smoothly. This is why it’s so important to have all four pillars working in synchronization.


For each pillar, we will look at some of the basic KPIs, some advanced ones, and which reports you need to calculate them.

KPIs are a very abstract concept, and too many KPIs could lead to analysis paralysis, so I want to urge you, if at any point there is something you are not sure about, please reach out to me, and I will be happy to direct you in the correct direction.

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