This morning I attended a talk at the Mobile Chamber of Commerce given by Kenny Crow, Managing Partner of Crow, Shields, Bailey PC. They are a local CPA firm that work with a lot of small businessses in the Mobile area. Kenny's talk was on Key Performance Indicators and using them to measure business growth. I'm hoping to get him on the podcast to talk about this a bit more, but I had some thoughts and wanted to share them with my fellow Small Agency Owners. Maybe this will even start a conversation that makes us all better.
Before we get too far, let's define Key Performance Indicators
A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives or activities.
As an example, in sales organizations you will often see KPIs like:
x leads generated = y meetings set = z proposals written = abc deals closed
And in the digital marketing world we measure everything from visitors to a site and how long they spend on any given page to the number of retweets a twitter post gets, etc.
I like measuring things. I measure how long it takes me to get places while driving. I calculate the cost / benefit of a few miles per hour on the spedometer and the chances of a ticket vs the time savings that I will get from the miles per hour. I like measuring how long it takes me to mow the grass week over week. I don't graph the average time it takes to complete a grass mowing so I guess I am not super nerdy about measuring but you get the point.
I also like measuring things about my business. We measure traffic to our website, leads generated, hours worked, revenue generated, etc. But... and this is a big one... I have often struggled with what to measure about my business, as it is not as clear cut coming up with Key Performance Indicators (KPIs) when you are running an agency. Our clients don't typically purchase from us weekly. As a matter of fact, some of our clients only buy from us every couple of years. The typical KPIs for a small business are:
- Number of clients
- Number of transactions per client
- How often those transactions take place
- Average dollar amount of the transactions
These measurements are worth keeping but they don't fit a Service Based Digital Agency as well as a business with 5000 customer selling widgets that cost $10.
What can't be measured can't be managed. ~ Peter Drucker
The quote above is one I have seen plenty of times, and Kenny had it as part of his slide deck. It is also the driving reason why it has been bumming me out that my own business is an area that I have not been able to measure (we're all friends here so I am being honest). But I want to manage my business better so we can be a more mature and more profitable entity. So this morning I was listening to Kenny and picked up on a number of things that we, as agency owners, can measure. That list is:
- Billable Hours
- Non-Billable Hours
- Total Hours
- Number of Clients
- Revenue generated from each client
- Total Revenue
- Profit from each client
- Referrals from clients
- Activity with A Clients
- Leads Generated
- Source of leads
- Source of clients gained
- Clients gained / lost
- Administrative Costs
- Client satisfaction
So, what do you think? Are there some that you would add to the list? I'm going to be (slowly) working on a way to capture this data. Some of it we are already capturing through various tools, but need to bring it into a usable format. Others will have to be manually captured. Ideally all of this information would be in one location that would allow us to, at-a-glance, get an indicator of how we are doing. If you've come up with a solution then drop me a line and share it with me.
If you are looking for more information like this then I would highly suggest picking up a copy of The E-Myth from Michael Gerber. It is an excellent book that I have given to many small business owner friends. And make sure to check the Mobile Alabama Business Podcast website as I do hope Kenny will come on and further this discussion.