Before the current economic recession, how was your business really doing? There were businesses that were obviously doing poorly and others that were obviously doing well. However, there were also businesses that seemed to be doing well; but, were actually built on shaky foundations. In many cases, the differences between those businesses have become underscored and very apparent since the economic crash of 2008.

So what’s the real difference between businesses that are doing well and ones that only appear to be doing well? More often than not, it simply boils down to whether or not management really knows what is going on inside the business. It is the difference between using your data to forecast trends so that you are prepared for what’s on the way vs. being forced to react to what has already happened.

If you ask truly successful business people specific questions about their businesses, they can generally answer your questions in very accurate specific terms. They keep track of how their business is doing by using Key Performance Indicators or KPIs for their business. Many even have their KPIs programmed into their accounting system and can look at the info “real time” on a dashboard menu on their computer. They have spent lots of time figuring out exactly which KPIs they should use as their business performance metrics.

So you may ask, “What are these KPIs or which ones should I use?” Well, that answer really is very subjective and dependent on the specifics of your business. Some fairly typical KPIs that might be considered are 1) revenue per employee, 2) revenue per unit of fixed cost, 3) number of units produced per employee hour, 4) total number of units per day, 5) revenue per dollar of inventory, 6) the acid ratio, 7) work backlog per month. The list is endless and, again, really depends on what YOU think is important for YOU to know about your business.

In essence, KPIs tell the story of your business. Your performance indicators should give you a complete snapshot of how your business is doing at a given moment in time. For example, if you have a bank loan, then you already have a set of KPIs that were selected by your bank to monitor your business. Why? Because, the bank wants to be able to look at your numbers and quickly assess whether the health of your business has changed. Keeping track of key performance indicators is most often the difference between knowing what’s going on in your business and not knowing.

So, let’s revisit the original question. Before the current economic recession, just how was your business really doing? How is it doing now? If you are not happy with your business, do you know why it is not meeting your expectations? If you don’t REALLY know what the problems are, then you certainly cannot take steps to fix them. If this is your situation, then it might be time to dig deep and identify where the problems lie. From that point, you can determine exactly what corrections need to be made and select KPIs that will help you measure your progress towards the business that you want to have.