Businesses are of immense importance to not only its owner but also to the government in general because they attract direct foreign investments and help in boosting up the economy. For the launch of any business, a lot of investment in terms of money and time is done and this does not end here, the injection of both these agents goes hand in hand until the end for the sake of success. The real question which arises is that how to determine the success or failure of any business, what is the criteria and who is the judge.
The KPI or the Key Performance Indicators are used all over the world when it comes to measuring the success or failure rate of any business. These indicators are measurable and tend to help the business in reaching its objectives and goals, which have been pre determined. One can determine the KPI by simply setting objectives of the company, for both the short and long run, add up the critical risks involved which might hinder the plan, list down the indicators which must be present to highlight the base and then collect the results when needed or necessary.
The KPI’s can vary from department to the department and can analyze both the quality and quantity of the target achieved. For example, if a sales department is not performing to its full potential then the KPI indicators will alarm the other departments and will analyze the factors, which is causing a problem. The KPI must follow the SMART mantra, which is also discussed in the business management courses. The SMART stands for the goals or objectives to be specific, measureable, achievable, realistic and time efficient. Setting some KPI measure for such a business, which does not have its objectives, vision and mission statements specified will prove to be of no use, Similarly, setting unrealistic goals, which are almost impossible achieve can also hinder the KIP’s measurability.
Some of the vividly used and important KPI’s for the businesses include the sales turnover ratio, gross margin, profitability ratios, inventory turnover rate and the list continues. The business try to evaluate their performances with the help of these indicators, they let them know about the success rate and what are the changes, which must be made to fight with the upcoming risks and problems. Another most important KPI indicator is the comparison of the current year’s sales with that of the previous year’s, this helps the businesses in determining that how much their performance has improved over the year and whether the new changes which they brought over proved to be benefit to the business or not. Some of the other KPI factors in the business are dependent on the economic conditions, brand awareness, recognition, sustainability, business genre and the target market.
These are some of the Key Performance Indicators like described by Matthew Knoot which are of great importance to any business for making sure of the good performance and the meeting og goals and visions.