KPIs Help Keep Companies on Track

Posted on June 9, 2016 by djb | Posted in Family Enterprise

After years of experience, owners often know in their gut how their company is doing at any given time.  But this vague notion of performance really isn’t enough.  As management gurus will tell you, “You can only manage what you measure.”

The best way to take the pulse of your business is by using Key Performance Indicators, or KPIs.  Unique to each company, KPIs might include things like average transaction value, customer satisfaction, quality rejection rate or productivity vs. capacity.

KPIs give you precise measurements of the things that matter most to your business.  Armed with these numbers, you can compare performance over time, set goals and constantly correct course.

Getting started:  What can you measure?  Consider every area of the company.  Each functional area will have its own indicators.  Once you start brainstorming, you’re sure to think of many KPIs that would be good to track.

Create a benchmark:  To measure improvement or decline, you need a benchmark.  Some of these “starter” numbers can be gleaned from the books — sales numbers, for example, are easy to find in the accounting system.  Others may require some outreach.  For example, an initial customer satisfaction survey will give you a benchmark for future years.

Dig in:  Once you start tracking KPIs, the fun begins.  Why are the numbers the way they are?  What can you do differently to change them?  People are often surprised to find that KPIs tell a different story than what they assumed.

Keep in mind that you don’t need to measure everything right away.  You may want to start with just a few KPIs and build from there.  Even a little bit of measurement will help you manage more effectively.

What are your KPIs? The Business Transition & Family Enterprise Advisory Services team can help identify them.  Give your DJB Advisor a call to arrange to get the process started.

Article adapted 2/11/2016 by  Paul G. Stringer, CPA, CA, FEA, Partner from the BOP (Business Owner’s Perspective) Summer 2010 article – purchased by DJB for our use.

Read more articles on topics related to business transition and family enterprise.

Paul Stringer, CPA, CA, FEA obtained his FAMILY ENTERPRISE ADVISOR™ certification through the Institute of Family Enterprise Advisors (www.ifea.ca) in 2013 after completion of the UBC Sauder School of Business Family Enterprise Advisor Program. This skill set, along with his extensive business and accounting experience, qualifies Paul to help leaders of family businesses manage the more complex and sensitive issues they face when making important decisions about the future of their business and their family legacies.  Paul can be reached at pstringer@djb.com or visit our website at www.djb.com.