KPIs are the lifeblood of Business Intelligence and defining what yours are is the first important decision you’ll need to make when starting your Business Intelligence project.

In this article, I’ll be sharing some tips on how to choose the right KPIs for your business.

Before we get started, let’s just remind ourselves of what KPIs are.

KPI meaning

KPI stands for Key Performance Indicator. They’re metrics or values that help measure a business’ performance or success in achieving its objectives.

KPIs will vary depending on the nature of the business activity but they can be high level, measuring the overall performance of a company or focus more on specific aspects of a specific activity, like marketing, finance, sales or website traffic.

How do you define your KPIs?

Well, some high level KPIs might come to mind fairly easily, things like total revenue or number of sales but what about the more specific ones?

Like I’ve said, it all depends on your particular business activity and what data you might have available. But let me share with you my top 5 tips on things you could try and think about to help you get started.

1. Personalise Your Business

My first tip is an exercise you can try. Imagine that your business has come to life as a personal assistant like Siri, Alexa or Cortana.

This assistant has access to all of your business’ data and can answer any question you might have relating to how it’s performing.

What questions would you ask? What are the most important things you’d like to know? What, for you, would be your Key Performance Indicators? Here are a few examples questions…

How much has our revenue grown this month?

Obviously, to answer this question you’ll will need to include your revenue metrics.

How is our website performing?

In this case you’ll need to define what KPIs define performance for you.

It won’t just be the number of visits it gets because it could be that visitors aren’t engaging with your site or you might be getting some spam traffic so you’ll need to think about things like the average session length, the number of pages viewed per visit and the bounce rate.

Want to learn how to analyse your website performance? Check out this article.

When should I order more stock?

Here, maybe you calculate a percentage of your stock capacity remaining KPI, side-by-side with a KPI showing the rate at which your stock is selling.

How has our new promotion impacted sales?

Here, you might need to compare sales for a period of time before and since the launch of the promotion to calculate the percentage difference.

What social media posts create the most engagement?

Here you could compare different social media channels to see which ones give you the most reach and engagement or maybe categorise your posts depending on their theme or content to see which perform better.

So, already, you can see that just by asking these kinds of questions, it gets you thinking about the data points you’ll need to use to answer them and focus in on the important KPIs.

2. Aggregators

My next tip is to consider different aggregators.  If you’re not familiar with what an aggregator is it’s things like SUM, AVG, COUNT, MIN, MAX, MED.

You don’t automatically need to aggregate your data by going for the SUM and just adding everything up to get a total value.

Different aggregators can be used for different KPIs to answer different questions.

Example, let’s say you run a restaurant. You might want to know what the average spend per cover is or the maximum number of covers you served during a day in a given period.

3. Periodicity

Which brings me to my next tip...periodicity.  What do I mean by that?  Measuring your KPIs over specific periods of time.  By measuring performance for one period it allows you to compare it against a previous period to determine how things are trending or evolving.  In a dashboard you will often see KPIs looking like this…

SLIDE WITH EXAMPLE KPI

Here we can see revenue for the past 30 days with a percentage of variation from the previous 30 days.  The figure for the previous period isn’t all that important but seeing that there’s a positive trend and by how much things have gone up or down is.

4. Calculations

My next tip is to think about combining metrics to create calculated KPIs. Let me give you an example.

Let’s say you run a shop or an ecommerce business and you offer shipping.

You might want a KPI which calculates revenue minus the shipping cost to see how much revenue you’re generating on the products themselves.  Get creative and think about how your going to best answer those questions you want answers to with the data you have.

5. Targeted KPIs

And finally, tip number 5 - which is kind of similar to combined metrics in that it involves calculations - and that is targeted or filtered KPIs.

If there’s a specific area of your business you’d like to analyse more closely you may need to target it by applying a filter to it.

Again, using a restaurant as an example, you might want to know how much was spent just on beverages. So you would need to use your revenue metric but then filter it based just on the drinks items.

Or if you’d like to know how much traffic social media is driving to your website, you’d need to take the total number of visits but filtered by those that have come from social media.

Conclusion

So, there you have it, my top 5 tips for helping you to define your business’ KPIs.

Now, as I said at the start, every business is different. So too will be its KPIs.

And this article is simply meant to get you started thinking about HOW to define YOUR KPIs.

Once you’ve done that you’ll need to then think about where the data lives to produce them so you can start to plan building your dashboards.