Key Performance Indicators (KPI) sound essential, but are they really? With all that is swirling around in the must-do category, where do they fall? In short, near the top. Here at Rieke Office Interiors (ROI), we check KPI regularly.

Why? You cannot manage what you don’t measure. Sure, you can manage your business, and even do it well, but you won’t be able to measure how well you’ve done or have a clear indication of why you’ve done well unless you can measure it.

KPI is used across all industries, from evaluating how well an employee, a social media post, or a product is performing, to how well your business itself is doing. The bottom line is only one indicator of your business’ health. Here are a few others that will help you identify problems and give you a chance to fix them before they hit the bottom line.

What drives profit?

Take a more in-depth look, on a monthly basis, to see what really drives profit. The amount of sales may seem like the obvious answer, but this isn’t always the case. At ROI, it’s actually production hours that drive profit.

Take a close look to analyze what drives your profit. If you have doubts, gather your top staff and toss it out for discussion. Once you have the answer, it’s easier to nail down how to increase profits.

What is your monthly break-even revenue number?

This is an important number to know and keep relevant when considering these KPIs. In hard times, zoom out and analyze how you can bring that break-even revenue number down. In good times, keep a close eye on it as well, and don’t let it creep up.

How do you find out earlier if there is going to be a problem?

Be proactive, and closely watch KPIs. For example, while it’s important to track funnel order entries monthly, at ROI we also found it useful to look at entries more frequently than once a month. KPIs can be broken down to per week orders, per week sales, average quotes, customer tours, and more.

Scheduling time to look at KPIs will help it become a natural part of your routine and help keep you from unpleasant surprises. It will also give you reasons to celebrate, and we always love those!

Job cost

At a high level, analyze the job cost. Be specific in analyzing the job cost by lines of service or different product lines. At ROI, we have flooring, installing, furniture manufacturing, and furniture design to name a few. This can reveal issues that need attention or opportunities for growth.

Cash flow

Companies need to effectively manage cash flow. Even profitable companies can go out of business without proper cash flow management. Be sure to invoice early and take advantage of early payment discounts from vendors. Borrowing from a line of credit, depending on the interest rate, is advisable based on the saving. Always make sure to pay down the line of credit as well.

Content

If your company uses inbound marketing, Google Analytics will measure KPIs for you. It will tell you how many people are visiting your website, how long they are staying there, how they found you, if they came from other websites, and if they are converting in any way, such as a newsletter subscription or pricing request.

Each of these KPIs may be items that you delegate to someone on your team, perform yourself, or outsource. For instance, you might hire a marketing firm to track your content KPIs, or ask your CFO to give you a monthly report on cash flow.

Regardless of which method you decide upon, make sure you are seeing the results and using them to make decisions as you move ahead. And, if you decide you love KPIs, you might want to look into customer satisfaction KPIs.