Undoubtedly, establishing a startup is quite challenging and demanding. Not only does it require capital, but it is also clouded by the uncertainty of the future, especially for the co-founders. Hence, co-founders must understand and lay down the company’s key performance indicators (KPIs) to keep track of their performance.
KPIs are a quantifiable measure of performance that shows how effectively the company is achieving specified business objectives. It demonstrates how a company is achieving its primary business goals by a measurable amount compared to other businesses in the same sector. Furthermore, KPI aligns your goal with your employees’ goal of achieving the company’s target.
In setting your KPIs, there is no procedure on how your KPI should be structured. Irrespective of the structure, the focus should be on what the company aims to achieve within the targeted period. KPIs could be financial-focused, customer-focused, process-focused or even general.
IMPORTANCE OF KPIs
Although KPIs vary among companies and businesses depending on their set goals, the following are the advantages of setting KPIs;
- Keep companies focused on achieving their targeted goals: Financial-focused Key Performance Indicators (KPIs), for instance, center on the company’s revenue and profit. For a business to remain competitively viable, it has to work towards or beat the standard net profit margin of the industry.
Where there are KPIs, everyone knows what they are doing to achieve their goal and why they have to do it. If the KPI is customer-focused, it focuses on each customer’s efficiency, retention, and satisfaction. Process-focused KPI measures and supervises operational performance across the organization
- Encourages accountability and transparency: Setting KPIs keeps founders and employees focused and more diligent in dealing with one another. This is because everyone can see what they are doing and how they are achieving their target. Consequently, it is easier to have meaningful progress to share about the startup, especially with investors. It also helps founders stay on top of their game.
Tips to Set Up KPIs
As mentioned earlier, startups use KPIs to expand sales and achieve high financial goals. These are some of the tips for setting up KPIs;
- Make it intelligent, realistic, and timely: To avoid wasting resources on metrics irrelevant to the business, prepare a KPI plan on the right metric to be measured.
- Get input from people to act on the decided metrics to be measured; each department in the organization needs to work with different KPIs based on their objectives to increase the efficiency and effectiveness of the company.
- The metric should also be able to identify areas that need to be improved.
CHALLENGES WITH KPIs
- Setting too many KPIs could confuse the team members leading to unaccomplished tasks.
- KPIs don’t offer information that can be acted on immediately; it takes time.