Whatever You Measure Is What You Will Get
Throughout my journey as a Chartered Accountant, one of my guiding principles is “Whatever you measure is what you will get.” This principle underscores the significance of Key Performance Indicators (KPIs) in assessing business performance, regardless of its scale.
I advocate having KPIs is an essential part of any business framework as they provide a tangible means to gauge performance and ensure actions are purposeful in propelling the business towards greater success. These indicators serve as navigational tools to guide business owners in making informed decisions and refining strategies for growth.
The importance of KPIs was apparent during a recent conversation with the owner of a dance school, who was aiming to grow the business in the coming year. What quickly became clear was that beyond projecting the annual gross revenue for the year, the owner had no other measures in place to measure the performance of the school.
To assist the owner in setting meaningful targets, we discussed what were the three key drivers of the business that would have a significant impact on the ability of the business to achieve the gross revenue target. The owner identified the following key drivers, none of which were currently being measured:
- The number of classes conducted
- The average number of students per class
- The average investment made by each student
By implementing systems to track these drivers, the owner will gain valuable insights into the performance of the business. Armed with those insights, the owner can make informed decisions about where to focus her efforts to have the greatest impact towards achieving the growth objective.