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Focus on Key Performance Indicators

By: Rick Gossett



To succeed in business, you need to see the signs. The signs are reality. It’s true in business the same way that it is true in sports, relationships, or any other part of life. But what does it mean to see the signs in business? What should you be looking for?

On the one hand, the signs will differ from business to business. No two companies are exactly alike, and the situations and circumstances will vary. But the basic principles remain the same.

Some of the most important signs you need to be looking for in business are your key performance indicators. These are where you boil down some specific measurement of your business into a number that can be tracked over time, compared, and evaluated. It could be anything. You can track total sales, month by month and year-to-year. You can track customer count, repeat customers, customer satisfaction scores, sales of particular products or services—anything!

When you track those numbers, they will tell you how your business is doing. It’s very easy to lie to ourselves and say we are doing fine, but the numbers will not lie. If you are not selling your product, the numbers will show it. If you are not getting customers to come back more often, the numbers will tell that. The numbers don’t lie. They are signs that point to fundamental truths about what is going on in your business.

But there are two very important points you need to keep in mind, in addition to just being careful to always look at the numbers and key performance indicators.

First, the number tells you “what,” but it doesn’t tell you “why.” It will tell you if you’re doing well or whether something is working, but it will not tell you why a particular strategy worked or did not work. You have to dig deeper. The indicators keep you rooted to reality, aware of the outcomes of what you’re doing. And once you’re honest with yourself and looking at what is happening, you can evaluate what the numbers mean and think about where any problems might be. When something fails, not everything you’re doing is necessarily wrong; maybe some percentage of things you’re doing are right, but other factors are dragging the rest down. Your task is to identify the culprits and make the necessary changes.

Second, you need to focus on just a few key performance indicators. The possibilities for things to measure are endless, but if you’re looking at every number, you’re really not looking at anything. You can get lost in the numbers, experiencing paralysis by analysis. You see so many different things, that you can’t focus anywhere. Sit down and identify a few indicators that are the most important to your business—two, three, or four should be enough. These ought to be the numbers that get down to the core of your business; if you are doing those things well, then the business should be successful.
Successful people look for the signs. Small business owners are no exception.

Published: April 2, 2013

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Rick Gossett

As COO of Tarkenton Companies for more than 20 years, Rick has been responsible for business software development, unique partnerships, business educational content and consulting, and more. Rick was the originator of Tarkenton Companies’s consulting service and initially handled all of the questions himself. Prior to joining Tarkenton Companies, Rick owned and operated a private practice as a CPA. Prior to that, he was a Senior Manager at Pannell Kerr Forster in tax and audit, as well as Principal in Ernst & Young's small business advisory group.

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