Generally, small business owners get caught up in the daily grind; working in their business instead of on their business. Many of us have been caught in the business conundrum of putting out the “daily fires,” which ultimately distracts from the big picture.
When I speak to other entrepreneurs I often realize that quite a few of them don’t see–or even know–the big picture.
“A business metric is a raw measurement of a business process that presents an unadulterated view of business performance that can be used to gauge performance,” according to Klipfolio.com. “A business may measure hundreds, even thousands of metrics to gain a complete view of each department or project’s performance.”
“Business metrics are closely related to key performance indicators, in that they both measure business processes to provide a view of organizational performance. The difference, however, is that KPIs typically incorporate additional information such as comparative values, anecdotal information, and long/short term targets.”
Every small business should be tracking both.
Tracking Key Performance Indicators
For example, “Do you know how your business is doing compared to the prior quarter — or year over year (YoY)? Is your sales revenue on an uptrend or down trend? If you know these key performance indicators (KPIs) great! If not, don’t worry. . .you are not alone.
Tracking KPI’s is essential for every growing business because these metrics enable you to measure, track, course-correct and grow. If you don’t know that your company is trending up or down, it is hard to know if you need to pivot and make changes.
For example, if you are tracking your total revenue and it is steadily up week over week, month over month (on a slow growth curve) it is probably not time to make major changes. However, you might not really notice this small growth trend if you aren’t measuring it. And a lack of data and insights about your business trajectory can easily backfire if changes are implemented that stunt your company’s growth.
The opposite is true as well. If your business is slowly declining, say 5 percent a month, you might not even notice for a few months. But if you were tracking your financials on a consistent basis you would be able to make the necessary adjustments.
In the end, a failure to measure slight and consistent changes can mean the difference between a successful business and one that can barely make payroll.