Growth KPI: Identifying key indicators for business growth
KPI (Key Performance Indicators) should give you indications on how well your business is performing against a key business objective. Most businesses want to grow and will have a target growth rate such as 20% year over year and although sales and revenue are great KPI’s, there are many more you can use which will help you watch the progression towards your goals.
I use a function in Excel to determine correlations between certain customer engagements, sales or marketing data and sales. I run the correlation function across many KPI’s to determine which ones have the largest effect on the growth before deciding which ones I will follow. I have broken out some of the most common KPI’s by funnel objective to help you predict how well your growth plan is working today and how likely it will be successful down the road several months or years into the future.
- Top of Funnel – This is the beginning of your relationship with potential customers. How many people know you and your brand? These KPI’s can be difficult to correlate to sales if you have a longer lead to sales cycle and you may have to run it several weeks or even months back to correlate with a certain time period for sales. Correlations are typically much smaller than further down the funnel since they are dependent on strong execution in the middle and bottom of the funnel.
- Reach – This will tell you how many people you are reaching with your ads. Google, Facebook and nearly every other digital platform will provide this number for you.
- Impressions – This will tell you how many times your ad was put in front of a user.
- Frequency – If you divide Impressions by Reach you will get Frequency which is how many times the average person was exposed to your ad.
- Mid Funnel – Mid funnel is where you begin engaging with the prospective clients. It’s the next step in your relationship with them and it becomes easier to correlate than the Top of the funnel to your end goal… growth.
- Engagement – This can mean a lot of different things depending on the digital platform and advertising methods. It could mean that someone simply “Liked” a post you have on your Facebook page or clicked on a Google search ad. It will show you how effective your Top of Funnel strategy is working as well as the content you are promoting in the Mid Funnel.
- Email List Subscribers – I’ve found a lot of correlation between the size of the number of email subscribers and sales provided the company is sending out regular communication through it such as special offers, coupons or upcoming events. It can be a great leading indicator of future sales.
- Traffic to the Website – How much traffic are you getting to your website content from the digital campaign shows some level of intent from the prospective clients viewing the ads. I tend to keep an eye out for the referral and paid ad traffic as well as the impact on direct traffic which would be those users who type in your domain name without going through a Google search or clicking on an ad.
- Bottom Funnel – Correlation is pretty easy to spot here. Users have already expressed intent and are ready to purchase. This is where you would typically have an offer with expiration to motivate the Mid Funnel to progress towards a sale. If you are an ecommerce company, then you might be looking at a final sale, if you are a service business you might be looking to setup a meeting here.
- Conversion Rate – This will tell you the percentage of people who are given an offer take it. The primary factors that effect this KPI are the perceived value of the offer, the design of the landing page and targeting of the audience.
- Average Revenue Per Sale – This will tell you how well you have optimized the landing page for Revenue. Do you have a “commonly purchased together” section before they click “Purchase” or a “customers who purchase this also purchased”? To get this number divide your total sales volume by the number of customers.
- Sales Funnel – If you have a long lead-to-sale cycle, it is imperative that you have a good CRM to track the progress of the leads down the sales funnel past the hand-off of the lead to the sales team. This is generally the first place to look when you are trying to improve sales in the short term.
- Conversion rate by sales person – This will tell you which sales people are best at converting a lead to a sale. Find the highest conversion rate sales people and get them into a room with the lowest. Have them exchange sales pitch ideas, tips and techniques and watch your sales grow. You can also offer sales incentives for improving this KPI.
- Profit per customer – Order your clients from most profitable to least and look for patterns such as the sales person responsible for bringing in the top clients, the campaign that helped drive that customer to the sales person. Look into the demographic of your most profitable clients to help target more like them.
- Customer Experience – The best data always comes from the very bottom of the funnel. If you are looking to grow, this is the first place you should start looking at.
- Customer churn rate – What percentage of your business do you lose each year? Lowering this number is the fastest way to grow your business. Call some clients who left to see if they can tell you exactly why. What promise did your company or brand make that they don’t feel you performed to? If they left for a competitor, then what promise did they make that was enticing enough to leave you? What would it take to get them back? It’s amazing what you might be able to uncover here, but also asking the questions shows you are making changes and you might be able to recover some lost revenue here.
- Customer surveys – Send them out if you aren’t already and try to get a handle on how happy your current clients are. It will let you know how vulnerable or strong your customer base is which is one of the best leading indicators of your future growth. If you don’t send them out yourself, check your reviews on Google, Yelp and Facebook.
- Sales from existing clients – There’s almost always additional revenue opportunity with your existing customer base. Do you have an add-on product or service you can begin selling to them? If not, go out and ask them what their pain points are outside of your existing product offering.