As a consultant, are you gauging performance with KPIs that matter?
KPIs, called Key Performance Indicators, are important tools that use both metrics and targets to track how your business is performing. They are related to your company’s strategic goals, such as increasing sales, decreasing costs, improving customer satisfaction, and decreasing unbillable time.
6 KPIs that matter
Revenue
Understanding the amount of money that you are making and where it is coming from is crucial for a healthy business. You are in business to be profitable and that requires understanding what money you are making in sales as well as what you are losing. If you have different market sectors that your sales come from, you want to know which sectors are doing better than others and how well they are growing over time. Additionally, other questions to analyze are: How stable is the revenue and how much of it is recurring? Who are your key customers? What is the proportion of sales per customer? Are there fluctuations in your revenue by season?
Customer Acquisition
Revenue is important, but an over-reliance on it can lead to an unstable and incomplete view of your company. In addition to asking yourself where your money is coming from, you want to work on improving your sales process by monitoring it and adjusting it. How effective is your sales process for growing leads? How many are you converting into customers and how much money are you spending on retention and conversion?
Operating Cash Flow
You have probably heard the phrase that “Cash is King”, but did you know that “Cash flow is Queen”? Do you have enough available cash to operate and grow your business? If something were to happen that stopped your revenue stream, such as what we saw with many businesses during the 2020 pandemic, how much time would you have until you ran out of money?
Managing cash flow is just as important as generating revenue. Other questions to help you understand cash flow include: How old is your Day Sales Outstanding rate? Are customers paying on time? Are they consistent in their payments?
Customer Satisfaction
Particularly look at loyalty and churn rate. Every company should anticipate some customer turnover but understanding the churn rate helps signal a change in buying habits, customer service issues and other problems. Understanding your customer engagement is also a signal of how satisfied they are, as well as help verify long-term success. Ask questions like, are they showing up and providing repetitive business?
Human Capital
Historically, the KPIs for human capital for consultants and other service-oriented companies have focused on how productive employees are planned to be and the ability to schedule and actively manage all projects and resources. With the growing concern about the Great Resignation, the KPIs for hiring and retaining staff have been placed front and center in many companies.
Technology
As a consultant, you probably rely on technology and security continues to be a top concern in many companies. How reliable is it? What is the condition of your technology and are you able to maintain it? What would happen if you had a problem with technology and it was not available, or if you lost data? Do you have a backup of what you need? How long could you continue to work easily and smoothly without technology?
Every KPI should be designed to improve the overall success of the company. Since they are unique to every business, you must look at your own unique situation and problems.
The Profit Enhancer Analysis evaluates these key areas of a business and positions you as a consultant to better support and guide your clients. Use the Profit Enhancer Analysis to guide the KPI conversation and develop growth goals for your clients.