KPI is a value that depicts how well the business is achieving its objectives. These indicators depict the health of the business and help in understanding the current standing.

Many do not understand the working of KPI or its effectiveness. The team should first know the goals to be achieved and a roadmap to get there. The local businesses run today do not grasp the concept of KPI, there are no targets set or expectations of any outcome. They run the business with a blind aim. Keeping objectives and continuously tracking them can help business owners to make crucial decisions. Are they losing customers? Are they making profits incrementally? Have the sales increased? The answer to these types of questions in the form of a quantitative value is a KPI.

Consider you set a target of getting customer acquisition cost from 800 Rs to 500 Rs. To achieve this, you will have a set of action plans ready which will be reviewed by the team and implemented. How will you know if the action plan is working out? You will monitor the acquisition cost weekly or on monthly basis and based on that you will be able to make strategic decisions.

Few important KPI's to track

Profit Margin:

It is calculated by dividing gross profit made by total revenue generated. If this is low you can verify your business process and identify unwanted expenses and cut them loose. Keep checking the margin once a month to track the progress.

Revenue per customer:

It is the revenue generated divided by the number of customers. If you make 1,00,000 Rs in revenue and you have 200 customers then your Revenue per customer would be 500 Rs. It also the productivity measure of your business.

Current Ratio:

It tells you if the business can pay its debts in the given period. It is the ratio of current assets to current liabilities. The current ratio should always be greater than 1 which means that there are assets worth more than your liabilities and hence you will face no issues in paying them off.