Quality management should use data that effectively show how your business is doing. It is important to know how to choose the best Key Performance Indicators (KPIs) for each strategy. KPIs are performance indicators that track the key processes of a company’s actions. Their Number strongly influences the success of an effort: due to their specific analytical nature, changes based on these indicators can promote the growth and strengthening of the company.
1. Return On Investment (ROI)
Return on Investment (ROI) is one of the most critical metrics for your business. ROI calculated the affirmation of investment and can be applied in different situations. Its formula is ROI = (Profit after investment – Initial investment) / Initial investment. Thus, the higher the ROI, the more assertive the action and the better the investment. A zero return on investment indicates an investment with no effect, and a negative return on investment suggests a lousy investment.
2. The Average Ticket
The average ticket is a fundamental key indicator for any strategy. It calculates, on average, how much each customer spends with your business over a period. Its formula is Average ticket = Revenue / Number of customers over a given period. But be careful: before analyzing this KPI, you must keep in mind the average cost of your product. After all, if you have more expensive products, it is natural that the average ticket will be higher.
3. Customer Acquisition Cost (CAC)
CAC shows how much your business has to spend to get a new customer. Its formula is calculated like this: Customer acquisition cost = Customer acquisition costs / Number of new customers in the period.
4. The Turnover Index
The turnover index is an internal KPI used to measure the degree of departure (or turnover) of employees from your company. For this calculation, the formula is used: Turnover rate = [(Number of layoffs + number of admissions) / 2] / Total number of employees. Which increases costs with selective processes and project continuity. Generally, the higher this index, the greater the need for appreciation and motivation programs.
5. Net Promoter Score (NPS)
The Net Promoter Score (NPS) is both a methodology and an indicator. It shows how satisfied customers are with your business, based on two main questions: From 0 to 10, are you happy with the company? From 0 to 10, what are the chances you sponsor the business? Customers who rate 9 and 10 are considered promoters, 7 and 8 are considered neutral, and those who order six or less are detractors. The higher your company’s NPS, the higher the care and service quality index, and the greater the chance of loyalty.
6. Debt Indicator
This KPI aims to show the level of indebtedness of a company. This information must always be available because a company with a very high debt margin usually has to rethink its strategies. In this sense, at some point, the company should postpone projects until its debts return to normal. Above all, this indicator can be decisive when attracting new partners or investors.
Debt ratio = (total liabilities / total assets) X 100.
7. Receiving Indicator
Some entrepreneurs confuse receiving and invoicing, but they are very different. It is even possible for a business to have good invoicing even when it cannot accept all of its due payments. This happens if she sells on credit, for example. A trick to achieving this result is to avoid granting credit to those who are in default.
Another solution is to invest in after-sales so that the consumer values the relationship with the company, choosing to honor their debts to avoid exhausting the company and to be able to buy again. In addition, investing in the efficiency of the collections sector can allow the company to recover values that it already considered lost.
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