On November 8th I suggested using Key Performance Indicators as a tool to manage a business and as a tool to become a business manager. On November 22nd I defined metrics and their use as KPIs. I know of over 100 KPIs that owners can use and there are more. Send an email addressed to me to port.charlotte@score volunteer.org and I'll send you some links to sites where you can learn more. In order to provide a few examples, I imagined a retail store occupying 3,000 square feet with five employees.
Sales and marketing. One KPI for a retail store is Guests in the Door. GID is a measure of the effectiveness of a store's advertising program. Data can be collected using a hand held counter and a log sheet. The results of advertising correlates with this metric. Another is Guest Conversion Rate. GCR is the number of sales transactions in a period divided by the GID in the same period. Product offerings, in store signage or staff salesmanship correlate with this metric. A third is Average Purchase. AP is total sales in a given period divided by the number of sales transactions in the same period. This correlates to total sales.
Customer satisfaction. Net Promoter Score is a measure of customer satisfaction. NPS data can be collected periodically using an anonymous questionnaire placed at the checkout counter. It asks one simple question: How likely is it that you would recommend our store to a friend on a scale of 1 to 10. Responses between 0-6 are classified as detractors and responses between 9 and 10 as promoters. NPS is detractors as a percent of total responses deducted from promoters as a percent of total responses. NPS correlates to repeat business from existing customers.
Operations. Two metrics useful as KPIs are Sales per Employee and Sales per Square foot. SPE is calculated as sales in a given period divided by the average number of employees in that period. SPF is sales in a given period divided by the total floor space of the store. Both correlate to profitability and have the advantage of being a benchmark against which the owner can compare his store against others since the data are frequently quoted in trade publications.
Finances. Inventory Turnover is a measure of how fast product stays on the shelf. IT is calculated by dividing cost of sales in a given period by the average value of inventory held in that period. Both sets of data can be drawn from financial reports kept on an accrual basis. IT correlates to cash flow. Fast turnover means less cash is tied up in inventory.