SME Sales KPI’s — You Cannot Manage What You Cannot Measure
I feel like I have been a stuck record concerning a number of my blog posts to date. The typical way I have ended my posts brings out the accountant in me, but I firmly believe in it. Not only do I believe in it from a marketing point of view, but it extends across an entire business. You simply cannot manage what you cannot measure. It was, therefore, inevitable that I would have to write a blog post on the matter.
“If you can’t quantify it, you can’t change it” — Peter Druker
Peter Drucker, credited with inventing modern business management, is widely regarded as the greatest management thinker of all time, having written 39 books on the subject. “If you can’t quantify it, you can’t change it,” he is quoted as saying. When you consider this quote, you should automatically realise how accurate it is. And you can’t improve at anything until you can calculate it and know the results.
If you don’t measure your performance throughout your business, you can’t improve. Worse still, you have no idea what you should be concentrating on. It’s like you’re lost in a maze, and you have no idea how to get out because you haven’t kept track of where you’ve been.
To date, I have very much been writing about marketing and how it can be adopted by SME’s; therefore, today, I am going to focus on a few KPI’s that SME’s can implement with regard to their sales and marketing. Businesses should keep track of quantifiable metrics and align with the company’s objectives and avoid things you have no control over or metrics that are just for show. A few basic KPI’s that can be used to track and monitor progress are:
1. Revenue Per Client (RPC): A measure of efficiency — is the most common and potentially the easiest KPI to monitor. A straightforward calculation (Revenue divided by the number of clients). Steadily increasing your revenue per client increases your overall profit margin in the long run. Things to consider to increase the metric are: What else would you give your clients for sale besides your current products? What are they looking for? What would be a complementary good or service that would add to the fun without being overbearing?
2. Client Retention Rate (CRR): Long-term profitability depends on client retention (the number of clients you keep). It’s the most critical KPI of them all because it tests how good you’re following through with your brand pledge Marketing campaigns, strategy, messaging, time and expense, as well as continuing sales activities, should all be prioritised. Retain the customers by doing the following: Deliver on what you said you’d do. Ensure that everyone in your business is on board with your vision. Recognise why customers are leaving.
3. Profit Margin (PM): If the cost of generating revenue exceeds the revenue generated, you have a negative profit margin, and your company is doomed. That is unless you are incredibly well-funded and have a lot of cash. If not, take a look at where and how you’re spending your money. What is the fate of your money? Whatever costs are out of your control? — expenses are appropriate and which are not? Which expenses contribute to revenue generation? Don’t forget about the revenue side of the equation. Are you charging a fair price for this or that? Is it time to revise your pricing strategy? Are your shows becoming stale?
4. Web Traffic Sources: The metric calculates which traffic sources bring visitors to your site and compares them. Direct, referral and search are the three primary traffic sources, but your website may also receive traffic from campaigns such as banner advertising or paid search. Consider analysing the number of target completions from each traffic source in addition to evaluating the number of visitors from each traffic source. This metric will also show you where to deploy your capital for the most effective marketing campaigns.
There is a multitude of information online and plenty of websites with a variety of KPI’s available. Whichever KPI’s you choose to make use of, ensure that they are applied consistently, and that team members know how to calculate them and influence or improve them. In many instances, companies have fantastic metrics and KPI’s that show all these beautiful things that the business does. Still, employees do not understand them and cannot effectively implement changes that will positively affect change.
The Myth
I feel the accountant in me cannot post something on the principle of you cannot manage what you cannot measure without addressing the fact that there are several posts online that this statement is not true or a myth. Dreamed up by the corporate dogma and indoctrinated in employees for the past few decades. These lovey-dovey individuals like to believe that the vast majority of essential things cannot be measured.
I am no psychologist, but people measure everything they do; it is in our DNA. It might be as simple as comparing the price of the tomatoes per kilogram you are buying at an organic market or checking how your retirement annuity is performing and whether you need to invest in different markets. We measure, study, calculate, what we need to do, how and when we need to do it. These may not be formal business KPI’s, but they are your own personal measurement tools, and they help you decide where you are and how you need to go forward. They exist, whether you like it or not.
Businesses in the past have definitely focused on the numbers and will probably continue to in the future. You, unfortunately, can not entice investors on airy-fairy hopes and dreams, with no figures to back up your ideas. I concede that people and human capital are complicated to measure, which is very subjective, and that no two individuals are alike. Still, managers and leaders constantly measure performance, be it formal or informal. While sometimes you cannot place a number on something, that personal “feeling” is a measurement.
The fact of the matter is numbers within a business are a historical reflection of what the company has achieved, and the only way to gauge how you are improving is to compare the numbers. The fact remains, you cannot manage what you cannot measure.
