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Other than really obvious big picture things like 'Profitability', KPIs (Key Performance Indicators) vary considerably from industry to industry and business to business.
Some which are useful in the restaurant trade are:
- footfall (number of customers)
- spend per customer
- gross profit per table
Thank you for the great question!The performance of the areas you choose to measure will differ depending on your goals, specific business type, operations and industry. KPIs apply at the organisational and individual levels. At an organisational level KPIs is a measuring how well the organisation is achieving its stated goals and objectives. At individual level KPIs are tracking how well the employees are actually doing. For example: PPH-productivity per hour, ATV-average transaction value, UPT-units per transaction, Personal Sales figures for week/month, number of new clients added to CRM. To ensure that these activities are in fact aligned with the organization's strategy, you do this through performance management and setting goals with members of your team( personal targets). By applying the principle of KPIs to employee goals and performance, you create a direct link between all of the key success factors to the overall strategy. The result is that members of your team actually do what they should be doing, and that your measurements for determining how well they are doing are clearly tied to organizational success. This is the crucial link between employee and organisational performance. When an employee's goal is defined in terms of an organizational KPI, it ensures that what the employee is doing is well aligned with the goals of the organisation. Then you can establish your rewards and recognition practices and to make sure that you are rewarding directly to the KPIs you set. Below are examples of important KPIs on organisational level: Revenue vs Target(comparison between your actual revenue and your projected revenue. Charting and analyzing the discrepancies between these two numbers will help you identify how your department is performing), CR-conversion rate in stores and online, cost of goods sold, profit per item, expenses vs budget, sales figures compared to previous period, number of new clients and number of returning clients(measures level of customer service) and of course the most crucial KPI is PROFIT. To run the business successfully you have to analyse both gross and net profit margin to better understand how successful your organization is at generating a high return.
KPI have the four pillar includes (PLAN, DO, CHECK, ACT), other important factor needs to consider while preparing your KPIs
1... Limitation of your annual budget
2... Institution strategic objective
3.... Development of staff
4.... Competer with other competitors
5... International standarzation like ISO and others
5... International trade
6... Comply with rules and regulations of country you running a business
6.. Corporate Social Responsibility
Performance indicators are often divided into four main types that fall into two broad categories:
In order for a KPI to be effective, it must have certain characteristic features. Some of these features are listed as follows:
KPI is a tool that enables businesses to measure their progress as far as moving toward goals and achieving success is concerned. Any business that does not have an idea of its own strengths and weaknesses may not be able to devise plans for further improvement and may not be able to guarantee constant success. The following are some of the points of importance of KPIs.
The main purpose of Key Performance Indicators is to drive the performance of your business. KPIs are capable of letting you bring about instantaneous changes to the segments of the business that may be underperforming and also offer crucial information on sales, marketing, finances and productivity. But this is only possible if you take time to select the right KPIs for your firm. Choosing the proper performance indicators is the first step toward quantifiable improvement, and you must consider several things before you do so for your enterprise. The following are some ways in which you can select the perfect KPIs:
1. Have a clear business goal in mindSince KPIs help measure progress made toward your business goals, you must have a very clear idea about what you really wish to achieve. Only by setting precise goals for yourself can you define your KPIs. Thus when you set out to define goals for your business, you must focus on hard or solid figures, for example: “Boost sales by 20% in the next 12 months” or “Improve conversion rate by 5% in the next 6 months” and so on. Besides business goals, you must also set clear goals for teams and individuals as well. This helps your employees work harder to achieve the exact figures in a given time period.
2. Select performance indicators that are directly linked to your business goalsYou must choose those performance measures that can offer you insight into the progress made by your business in a given period of time. This progress is always relative to a business goal and hence you must make sure your KPIs are aligned with the goals. For example, if your goal is to improve sales by 20% in the next year, then your KPIs must include conversion rate, daily sales and website traffic, etc. On the other hand if your intention is to increase conversion rate by 5% in the next 6 months, then your KPIs must include daily sales, price trends, and retention rate, etc.
In order to choose goal-aligned KPIs, you must ask yourself the following questions:
Once you have answered these questions, you will be able to choose the indicators that are of true importance to your business. It is critical to understand that there are plenty of KPIs, but not all may be suitable for your strategic and operational goals.
Depending on the area you would like to improve in your business, here are some ideas for KPIs:
To evaluate your market:
To understand your customers:
To understand and improve your employee’s performance:
To improve financial performance:
To measure and improve your operational performance:
When selecting KPIs, make sure that they meet certain mandatory characteristic requirements. A description of the most important ones has been provided below.
KPIs must be measurable.
Key performance Indicators must be measurable and quantifiable. This is the most basic feature that every KPI must have, irrespective of the industry or company in which it is used. If a metric is unable to measure performance or success of an activity or business as a whole, then it doesn’t serve its inherent function and must not be utilized. KPIs must be able to gauge, evaluate and offer solid results.
Consider the business’s growth stage.
Some metrics may prove to be more important than others, depending upon the growth stage in which your business currently is. If your business is a start-up, then you must choose metrics that are associated with business model validation, whereas if it is in its established stages, then you must select metrics like customer lifetime value and cost per acquisition. The following are the three stages of growth with the corresponding metrics for each:
Consider the industry your business is in and the most appropriate industry practices for KPIs.
It is important to know that KPIs differ from company to company and also from industry to industry. Therefore, it is important to consider the industry your business is in while selecting KPIs. The following are some of the suitable KPIs for different industries:
Consider workforce as a KPI.
If you run a service-based business, then you must consider your workers as a KPI as well. For businesses such as yours, the labor is the biggest area of expense. If you consider it as a performance indicator; you can manage the costs of staff better, thereby boosting overall performance. Thus in order to make crucial decisions, you must create useful labor data and reports in a timely manner. The reports must consist of aspects like realization rate, utilization, and gross profit margin.
Identify the target audience and then consider its point of view.
It is very important for you to identify who your target audience is so that you can base your KPIs accordingly. Once you know who you are targeting, you can consider the customer’s point of view and then choose those metrics that can measure their customer experience and satisfaction levels.
4. Consider the consequences of choosing particular KPIs for your businessIt is very important to follow a systematic approach when choosing KPIs. Avoid selecting KPIs without considering the consequences that they can produce. For example, a certain KPI may help you measure the performance of a particular activity but it could indirectly be affecting other aspects of performance and hence must be avoided. A well-planned and researched approach must be followed when shortlisting the performance indicators.
5. Keep the list of KPIs concise (avoid unnecessary metrics)Your list of KPIs must be kept short and effective. Having too many metrics can make evaluation of actions complex and may confuse your employees. Measure only that data which really matters to your organization and can help you make improvements. Remember that it may take time to narrow down your list of indicators but it will prove worthwhile. The optimal number of KPIs that you must have is about 5–9. Anything more than this will make you lose focus on the important variables. Thus, eliminate unnecessary metrics.
6. Understand and determine leading and lagging performance indicatorsAnother step to choosing your KPIs is to know and understand the differences between leading and lagging indicators.
Lagging indicators — these are indicators which measure the overall performance of the business and are backward-focused or trailing in nature. This means that they help to evaluate performance information which has already been captured. Everything you wish to monitor will have lagging indicators, such as number of sick days, returns on investments and even the number of bags moved in a single day, etc.
Leading indicators — these indicators are considered as business drivers since they point to the direction in which things are moving. They change quickly and come before an upcoming trend. For every business, identification of leading indicators is important as far as the strategic plans are concerned. They must be chosen carefully and should be unique to your business environment.
7. Avoid getting caught up in the number gameThe total number of likes, the number of page visitors, the percentage of increase in signups and other such numbers can really capture you in a net and make it difficult for you to see the larger picture. Your focus must always be on the quality and not the quantity since the most important parts of businesses are often not measurable. It is easy to get caught up in the number game of KPIs but you need to move forward from vanity metrics and concentrate on what really matters. Ask yourself if a slight increase in the ‘Likes’ on your Facebook page would really affect your success.
8. Know where your money is goingAnother point that can help you in selecting the right KPIs for your business is to consider exactly where your money is going. It is a good idea to determine the areas where you are spending your money and then find out if these areas are linked to the goals of your business. Also, see if a KPI can be associated with these goals. The basic idea behind knowing the direction of the flow of money is to be able to choose only those KPIs which can keep a check on your expenses.
* USP of the business
* key audience or the target customers and meeting thier needs
* Quality of the goods
* On time ready and delivery
* Cost of the goods within the budget
To have a successful business it is necessary to measure each crucial aspect that keeps the business running.
1st on the priority list- Customer's Satisfaction (checking transaction count from new customer and existing customer. Because in business it is easy to get a new customer than to maintain an existing one.
2nd - Revenue Improvement (Sales Comparison from last year to this year/or last month this month) etc.
3rd- Measuring the time of the Investment Returns.
There many types of investment depends on which business are you into. Employee is also under Investment aspect, you are investing people picking the right person for the right task. Are your staff effecient enough to give you a favorable returns?, Cost Control can be under this as well, does your cost are properly controlled and monitored? this is also one of the crucial aspect that will determine your revenue.
Business managment is wide world, first of all we have to define area of interest (Sales , Marekting , Services ..... ), then we will start building vission, mission, Strategies and goels on all levels then we have to build the (Smart) KPIs.
So the crucial KPIs depends on the adopted startegy ...
For example ... evaluating Market - Share if you are in Brand building level The KPIs of market penteration (the points of sales having my product) is crucial (horizintal) , But if you are of Sales Acquistion the sales volume is the crucial KPI (Vertical).
Time is the essence! Everything turns around time, once you control it you can answer the question "how long does it take to deliver?" Then you can move to cash and answer "how much does it cost?". Finally with both you can determine all sorts of KPI, but perhaps the most important is chash flow, so can you determine net present value and the internal rate of return to further compare business startegies.
What kind of industry, will you apply the KPI'S on?
What kind of KPI financial / operational ?
Bit depends on where and what you want to achieve
