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What are KPIs?

Books & Resources, Leadership, Money and Finances

We just love to take shortcuts. As humans. Why say 3 words when we can just rhyme off the first 3 letters as though it were a word itself? Acronyms are everywhere, especially in marketing. All entrepreneurs should understand what are KPIs, and how to apply them in a meaningful way.

Why?

Because the information that comes from tracking the right KPIs can help make better business decisions. Basically, it can mean the difference between a good year and a bad year. So this article will explain KPIs, how to use them, and what KPIs should be tracked for different kinds of businesses.

Key Performance Indicators

KPI means Key Performance Indicator. There are countless data points in running a business. Just looking at finances, customer service, and marketing can yield dozens of measurements. Profit margins, response time, customer satisfaction surveys, click-throughs and orders from a social media campaign – the list goes on and on!

Specifically, the purpose of using KPIs is to cut through mountains of data to focus on the measurements that matter most to a business. And what metrics matter the most? It depends. It depends on how long a business has been operating, its size, its sector, and its strategic plan. A plumbing company will want to track different information than a hair salon; an e-commerce business won’t care about the metrics that matter to a law firm. Accordingly, a new business with one employee won’t get value from tracking the information that a huge corporation does.

The top KPI categories are:

Finance KPIs
Operations KPIs
Marketing KPIs
Sales KPIs
Performance KPIs

Benefits of Using KPIs

First, let’s look at the benefits of using KPIs to understand the importance of tracking key performance indicators.

The quote “what gets measured, gets managed” has been attributed to Peter Drucker, though this may just be paraphrasing his work. The point is, information matters. Being successful in business without tracking important metrics is like asking a pilot to land on the runway while blindfolded. And this is the thing about numbers. They tell the truth. Because people are prone to emotion and interpretation.

Additionally, tracking and analyzing KPIs provides direction and accountability. If the goal is to grow, then by how much? Set a specific target. Monitoring the metrics on a regular basis gives entrepreneurs the information they need to know exactly what is working, and what is not.

Example of Using KPIs

Here is an example of why KPIs are important to a business. The owner of a retail shop calls in on Sunday afternoon to see how things are going. Staff say it’s very busy and they are run off their feet. The owner rightly thinks that means sales are booming. Based on that bit of information, what decision might she make? Perhaps ordering more stock, or scheduling extra staff the following weekend.

However, a look at the KPIs tell a very different story. Daily sales reports show that revenue was 3% lower than the previous weekend. Sales per employee ratios show that one person booked almost zero. When armed with this information, the owner asked staff more questions. She learned the store was busy with many customers returning a particular item. Several people browsed and chatted with staff for ages, before leaving without making a purchase.

Therefore, with this information, the shop owner will be making very different business decisions. This is the power of data and KPIs.

How to Use KPIs

As mentioned above, the right KPIs for one business may not be right for another. There are 3 main steps to follow for using KPIs.

Know Your Strategy

It all starts with the strategic plan for your business. KPIs measure the aspects of performance that have the biggest impact on reaching goals. If the priority is to increase audience, then social media and marketing KPIs like reach, follows, and signups must be tracked closely. If the focus is to increase sales, then sales per employee and conversion rates matter most.

Share and Engage

Don’t keep KPIs a secret from your team. Share and collaborate. Engage them in the reasons why this information is being tracked. This may be a strong motivator for improving their own performance, when KPIs are tied to compensation, bonuses, or perks. At the same time, keep an open mind for ideas that come from your staff.

Monitor Regularly

Just having KPIs are not enough, just like having a gym membership isn’t enough. Likewise, you have to show up, pay attention, and do the work. So monitor your metrics regularly. This could be 30 minutes weekly or an hour a month. Then, on a quarterly and annual basis, set aside time for a deeper dive and analysis. This information you gather is valuable for forecasting, setting targets, and making decisions for the coming year.

In general, all entrepreneurs should track revenue, expenses, profits, quality, customer satisfaction, staff performance, and the effectiveness of marketing activities. In addition, here are KPIs for specific sectors.

KPIs for Service Businesses

Service businesses don’t sell things – they sell time and expertise. This ranges from house cleaning, painting, landscaping, pet grooming, graphic design, tutoring, nutritionist, fitness training, and more. Though these may operate out of a brick and mortar office, half of the businesses in the United States operate from home.

Without inventory to track and a storefront to maintain, here are the top KPIs for services businesses:

Customer satisfaction rate – valuable to use in marketing!
Service delivery time – important for scheduling and controlling labour costs
Acquisition cost – the marketing spend to land a new customer
Referral rate – how many customers are here from word of mouth?
Retention rate – how many customers return?

KPIs for Retail Businesses

Obviously, running a retail business is not what it used to be! Now that ecommerce has changed shopping habits. But there are still locally owned shops, especially in niche markets. Businesses like hair salons, barbers, massage therapists, and nail salons have a storefront, employees providing services, and may be also sell products to their customers. The top KPIs for retail businesses are:

Sales per product and Gross profit per product – to monitor what sells best and earns the most
Walk in traffic – how many customers came in without an appointment
Repeat customers
Product sales per employee

KPIs for ECommerce Businesses

Shopping online has been growing since Paypal started in 1998, but then the pandemic lockdowns seriously changed our buying habits. And many e-commerce entrepreneurs are home based and use drop-shipping to manage inventory and fulfilment. So, these KPIs are all about inventory and tracking the pennies on every product.

Sales per hour, day, week, month, quarter, year – to know the peaks and valleys to prepare for the future
COGS – cost of goods sold, by SKU (stock-keeping unit)
AOV (Average Order Value) – valuable for making marketing decisions
Shopping cart abandonment rate – to direct email campaigns
New vs returning customers
Conversion rate – how well is the site converting visitors to buyers?
Product affinity – what products tend to be ordered with other products? Can drive cross-promotion.
Inventory levels – to know what sells fast and what isn’t moving
RPV (revenue per visitor) – how much on average does each site visitor spend?

KPIs for Professonals

Next, the professionals. From accounting to tax advisors to mortgage brokers to lawyers, these businesses are often legislated and overseen by a professional body. Therefore, running a professional corporation requires a close eye on details. Accordingly, here are specific KPIs for professionals:

Number of customers per professional
Billable hours and non billable hours per professional per month – to monitor performance
Overhead costs as a percentage of gross revenue – to ensure these expenses don’t grow unless the income does
Average fee per client
Length of accounts receivables – to ensure customers pay on time
Conversion rate per professional – to see who closes more leads
Cancellation rate – how many customers cancel appointments?

KPIs for Trades

Though lots of tradespeople work solo, many are entrepreneurial and establish a brand with employees working for them. Also, there are franchise systems in furnace repair, plumbing, and electrical. In all cases, tracking time and workflow is important for customer satisfaction and to maximize profits. Here are important KPIs for trades.

Average service time per tradesperson – to benchmark performance and set schedules
Completion Rate – percentage of customer requests completed on time
Service response – average time between customer request and booking the service call
Variable costs as percentage of gross revenue – especially for costs of equipment and maintenance
Complaint rate per services completed – to measure quality and performance
Complaint resolution rate – how well are issues being fixed?
Quote acceptance rate – of quotes given, how many customers book the work?
Net profit per job – tracking revenue against cost of labour and supplies

Conclusion

Basically, knowledge is power. As a result, knowing the facts about strategic elements of their business can show what is working, what is not, and what changes to make. Therefore, understanding what are KPIs for their business gives entrepreneurs specific targets to focus on. So stepping away from the day to day to monitor and analyze key performance indicators is especially important for entrepreneurs.

What are KPIs? Read More »

What is CTA?

Books & Resources

Recently, I mentioned to a client that their website needs a stronger CTA. And they asked me, what is CTA? Which stopped me in my tracks. Because I realized two things.

One, I dislike speaking in acronyms, and wasn’t aware that I was doing it.

Two, I had made an assumption, which is never a good thing. I assumed my audience knew what a CTA is. But as a new entrepreneur, they hadn’t heard of it before. So here is this post, to explain what is CTA, what it means, why it matters, and examples of how to use it in your business.

CTA Explained

CTA is an acronym for Call To Action. It’s common jargon in marketing. Because when people find themselves saying something dozens of times a day, they tend to find a shortcut. Call to Action describes a prompt or invitation to encourage your audience to do something. Essentially, whether it’s a basic “buy now” to a creative “give me the details”, it directs what action you want your audience to take. Read on for more examples later in this post.

Why does CTA matter?

Basically, doing a marketing campaign without a call to action is like trying to drive a car without a steering wheel. You have no direction, and get nowhere fast.

A CTA encourages the action you want a customer to take. Consumer behaviour has been studied for decades, and one constant truth is the need to ask or instruction potential customers to do something. Though technology has changed how we interact with brands and gather information to make purchase decisions, human psychology hasn’t evolved. We still follow the basic framework that marketing dudes from the late 19th century talked about – Awareness, Interest, Desire, Action, or AIDA. That Action is the CTA – call to action.

Tips for Writing a CTA

At this point, we have a solid understanding of CTA. Next, let’s look at tips for writing a CTA for your business. As well as words, a CTA is also colour and image. Because the use of photos, video, movement, colour, and makes the message stronger.

Be on brand

Firstly, be sure the appearance, message, and tone of your CTA matches your brand. For example, if your brand colours don’t include yellow, then don’t use a yellow button to say “Order Now.” However, if your brand is quirky, fun, and playful, then don’t use a serious and formal call to action.

Be specific

Essentially, tell your customer exactly what you want them to do, and when. Creating a sense of urgency is a proven way to encourage action. A CTA should be specific, as in “Shop Today” or “Start Now”. Another way to be specific with a CTA is to add numbers. As in “Signup to get 50% off.”

Be concise

Don’t write a whole sentence, when just a few words will do.

Be strategic

Also, create each CTA to align with the goal of the marketing campaign, which in turn should connect with your strategic plan. For example, if your business is aiming to build brand recognition, then the call to action should be “Learn More” to get more visitors to your website, or “Follow Now” to grow your audience and increase visibility.

Be emotional

A CTA which creates an emotional response is effective for encouraging the audience to follow through. Use a CTA that connects to the desired outcomes of your target customer. This could be “Start improving your health today” or “Yes, I want to be more productive”

Be consistent

If sales is a numbers game, then marketing is about repetition. And consistency. So use the same CTA across all channels for the same campaign. Don’t use one on TikTok and another one on Facebook.

However, an exception to this rule would be if you are doing A/B Testing, which means running the same ad to the same audience with one modification – like different call to action phrases – to measure the response rate.

Be Flexible

Finally, monitor the conversion rates of your marketing, and be flexible with making changes if the response rates are low. Measure how many people followed through on your CTA, and if that rate is very low, consider changing the CTA to see if the results change.

CTA Examples

As explained above, CTAs should be on-brand and connect to the strategic objective of the marketing campaign. Therefore, an ecommerce business has different CTAs than a non-profit organization. Next, here are some CTA examples by sector and purpose:

Building a community

Subscribe, Join Now, Sign up, Refer

Selling products or services online

Order Now, Buy, Shop, Add to Cart, Learn How

Blog

Learn More, Read More, Discover, See More

Generating a Lead

Request a Quote, Get Started, Contact Today, Get in Touch

Lead Magnet

Download Now, Free Download, Claim, Get Code

Building reach on social media

Non-Profit Organizations

Donate, Support Us, Volunteer, Give Today, Adopt, Help Us

What is CTA and Why it Matters

Clearly, entrepreneurship has its own set of acronyms and abbreviations. Certainly, this can be intimidating as a new business owner. But just as every big company started out as a small company, everyone had to learn the terms and lingo of being in business. All in all, understanding CTAs is valuable for getting the best results from marketing and customer cmmmunication. Overall, marketing is about consistency and repetition, so once you craft a strong CTA, use it throughout your website, email, ads, or direct mail.

What is CTA? Read More »

Best books for a start up business

Books & Resources, Operations

Whether you are starting your first business, or your fifth, it’s always good to review the basics. Operations, systems, marketing, customer experience – the foundations of a successful business in all sectors. Sure, there are loads of resources out there. But who has time for all of it? So here are the best books for a startup business to remind you of fundamentals as you develop your new idea.

The E-Myth Revisted

By Michael E. Gerber

This is a classic, and for good reason. Yes it dates back to 1985 – LONG before we ran businesses online.

So WHY is it still relevant today?

Technology may changed the mechanics of how we do business, but this book gets into the structure of how a business runs.

The E-Myth Revisted explains why so many businesses fail.

Basically, just because an entrepreneur has passion or expertise in something doesn’t mean they will be successful running a business doing it.

For example, someone is excellent at bookkeeper, so they start a bookkeeping business. However, they know nothing about running a profitable bookkeeping business.

There is very good reason why Simon’s original “Start with Why” Ted Talk has been viewed millions of times. He effectively he cuts through all the talk of tactics to get to the core purpose of why a business exists.

However, I highly recommend owning this book to get the most benefit.

Because knowing the WHY of running your business is transformational. Not just for you as an entrepreneur. But also for your staff and customers.

And also, being connected to the PURPOSE of your business creates opportunities for more PROFITS.

Start with Why

By Simon Sinek

Start with Why

By Simon Sinek

The Lean Startup

By Eric Ries

Get your copy of The Lean Startup to have a blueprint handy for the innovative Build-Measure-Learn feedback loop.

Yes, all business has risk. Especially start ups – studies show that 90% of startups fail.

So this book outlines a scientific approach to measuring and monitoring performance to guide business decisions.

For entrepreneurs stuck in analysis paralysis, this book will help you get going and get launched. It’s a useful framework to get your ideas out there so you can improve and develop using real data from the marketplace and your target customers.

This list of best books for a startup business wouldn’t be complete without one about consumer trust and customer experience (CX).

I must admit my bias here. Since I spent 20 years running a B2C service business, I have a deep appreciation for value of CX in building revenue and profits.

In fact my passion for CX led me to do my MBA dissertation on how Airbnb retains customer trust online.

The book Extreme Trust explains dull academic concepts in a highly engaging way. By using real-life examples, every entrepreneur can learn lessons to apply to their own business.

So if you are working on pricing policies, terms of service (TOS), and marketing copy, this book will help you see how that all connects to building strong CX – which translates to healthy profits.

Extreme Trust

By Don Peppers and Dr Martha Rogers

Extreme Trust

By Don Peppers and Dr Martha Rogers

This list of best books for a start up business wouldn’t be complete without one about consumer trust and customer experience (CX).

I must admit my bias here. Since I spent 20 years running a B2C service business, I have a deep appreciation for value of CX in building revenue and profits.

In fact my passion for CX led me to do my MBA dissertation on how Airbnb retains customer trust online.

The book Extreme Trust explains dull academic concepts in a highly engaging way. By using real-life examples, every entrepreneur can learn lessons to apply to their own business.

So if you are working on pricing policies, terms of service (TOS), and marketing copy, this book will help you see how that all connects to building strong CX – which translates to healthy profits.

Brand Storytelling

By Miri Rodriguez

This book is a love child of my passions – marketing and customer experience.

After all, marketing is more than content strategy and taglines.

This book simplifies the process of how to communicate your brand to customers.

The author is an award-winning storyteller and has many inside baseball stories to share about top brands. She includes interviews and case studies which will inspire you and deepen your understanding of how customer experience and storytelling connect.

Expect to see how marketing is really about creating an emotional connection with your target audience. So this book is a must-read for any start up business.

Yes this is another marketing book. But a list of the best books for a startup business wouldn’t be complete with out it. Because Building a Story Brand has quickly become a classic. And it worth having your own copy to guide you through the process of building the brand story for your start up business.

As author Donald Miller explains, “your customer should be the hero of the story, not your brand.”

And this is the real power of this book. It gives entrepreneurs a framework to communicate what your company does in a way that is meaningful and engaging for your target customers.

Building a Story Brand

By Donald Miller