Running a business without KPIs (Key Performance Indicators) is like sailing a ship with your eyes closed—you don’t know if you’re moving in the right direction, and the chances of safely reaching your destination are slim. Effectively defined, tracked and managed KPIs provide a clear view of how well your business is progressing toward its goals, indicating where you’re cruising smoothly, where you might be drifting off course, and what adjustments are needed to stay on track.
KPIs are measurable values that help businesses evaluate their success in achieving key objectives. These metrics can span a wide range of areas, including financial performance, customer satisfaction, employee engagement, and operational efficiency. KPIs act as a North Star, guiding your business toward its goals by offering a clear picture of what’s working and where improvement is needed. At HerDataStudio, we recommend our clients to follow our DTR framework - Define, Track and Review framework:
- Define your KPIs
- Track and automate
- Review continuously and adjust
"Businesses that track KPIs are 10x more likely to hit their goals because tracking provides clear, measurable results. 🎯 In fact, 91% of companies believe that data-driven decisions, like tracking KPIs, are critical to business growth, helping to uncover opportunities and streamline operations. (PwC)”
Define, Track and Review
Part 1: Define Your KPIs = Clearly Define What Success Looks Like
The first step in leveraging KPIs for business success is to clearly define them. Without well-defined KPIs, running a business can feel like navigating without a compass. Your KPIs should allow you to set specific, measurable, attainable, relevant, and time-bound (SMART) targets, ensuring they align directly with your business goals. Additionally, it’s crucial to assign ownership and accountability. Depending on the size of your business, you may need to break down your main KPI into sub-KPIs to ensure everyone is working toward the goal in a specific and tangible way.
For example for an ecommerce business, your primary goal may be to scale the business and your main KPI might be revenue. While the CEO or Founder may be directly responsible for this metric, it's important to distribute accountability across the team, ensuring that every member is responsible for a metric they can directly influence. This approach helps ensure that everyone is actively contributing to the overall goal.
Let’s break this down: if your main objective is to increase revenue, it can be broken down to Average Order Value (AOV) multiplied by the Number of Orders
- Revenue = Average Order Value (AOV) × Number of Orders
These can be further broken down as follows:
- Average Order Value (AOV) = Pricing × Average Quantity per Order
- Number of Orders = Traffic × Conversion Rate
Each of these sub-KPIs can be assigned to specific teams within your organization. For instance, the marketing team might focus on increasing Traffic, while the store merchandisers optimize AOV with their pricing and bundling strategy, and the product & sales team works on improving the Conversion Rate. This breakdown creates a KPI tree, ensuring that every team and employee understands how their individual contributions directly support the company’s main KPI—revenue.
To help you get started, take advantage of our limited time only FREE KPI-setting template as a guide (use code: "GETSTARTED"). If you need further assistance, our ready-to-use analytics templates and consulting services are available to provide additional support. Checkout with the code: "GETSTARTED" to download this KPI setting guide for FREE.
Herdatastudio - Free KPI Setting Template
Part 2: Track and Automate
Once your KPIs are defined, the next important step is to ensure they are consistently tracked and monitored. Manually tracking KPIs can be cumbersome, takes away resources from growing the business, and is often prone to errors. Developing the right views and incorporating automation is key to ensuring that data is captured consistently and analyzed timely. This allows businesses to stay agile, adapting quickly to changes in the market.
Netflix is a prime example of a company that heavily invests in data analytics, with large teams dedicated to tracking viewer engagement and content performance in real-time. This enables them to make quick decisions about content investments and personalization strategies. Their continuous, automated KPI tracking has been instrumental in maintaining their position as a leader in the streaming industry.
However, you don't need Netflix-level resources to effectively track your KPIs. While big data investments can offer advanced insights, small teams can also achieve powerful results by working smarter and leveraging ready-made solutions. KPI tracking doesn't have to be complex or expensive—often, a simple yet effective approach is all that's needed, especially for smaller teams.
Applying the 80/20 rule here can be particularly beneficial. Focus on the key metrics that drive the majority of your results, and use straightforward, cost-effective tools and templates to track them. By doing this, you can start reaping the benefits of KPI tracking without incurring the high costs typically associated with big data infrastructure.
Part 3: Continuously Review and Adjust
Defining and tracking KPIs is just the beginning. To truly drive business success, KPIs must be continuously reviewed and adjusted as necessary. Regular reviews with your teams allow you to take timely actions from the insights. Reviews are also important to assess whether your KPIs are still relevant, if they are being met, and if any adjustments need to be made to your strategy. As your business grows and goals evolve, it's crucial to revisit and refine your KPI setup to ensure that your metrics stay aligned with the changing needs of your organization.
Drive Your Business Forward with Our KPI Data Tracking Templates
At HerDataStudio, we understand the transformative power of well-defined and effectively tracked KPIs. That’s why we’ve developed customizable KPI data tracking templates to help businesses like yours monitor key metrics effortlessly. Our templates simplify the process of setting, tracking, and analyzing KPIs, empowering you to focus on what really matters—achieving your business goals.
Ready to take your business performance to the next level? Explore our KPI data tracking templates and start your journey to success today!