Your day-to-day responsibilities as a creative entrepreneur can often cloud your focus on long-term business goals. For this reason, KPIs are essential to staying on top of your game!
Key Performance Indicators (KPIs) are quantifiable values that show how well your business is running—without the complicated data. KPIs simplify progress analysis by presenting a straightforward report on elements of your business such as workflow efficiency, marketing success, and financial health! There's no fixed list of KPIs every business must track—it's all up to you! But many businesses choose to adopt those that revolve around financial performance, customer satisfaction, and project management.
When identifying what KPIs you will hold yourself accountable to, you should always consider the nature of your business and your priorities. Let's explore some options...
Financial KPIs
Net Profit Margin
Formula: net income / total revenue
In business, there is one main goal: to earn. Your net profit is your "take-home pay"—so the more the better right? Monitor your net profit margin and constantly ask yourself how you can improve—spending down, income up!
Many creatives underprice their services out of passion, naivety or a lack of self-belief. Make sure you're charging what you're worth!
Quick Ratio
Formula: (income + securities + receivable money ) / liabilities
Unexpected costs happen, but you can be prepared for whatever comes your way! It is sensible to regularly check in with your quick ratio to ensure that your earnings can pay off your debt and liabilities. A quick ratio of 1 or higher means you're financially safe. Anything less than 1 means you'll need to exert more effort to make ends meet!
Customer KPIs
Customer Acquisition Cost (CAC)
Formula: marketing expenses / no. of new customers
A marketing mantra for creative small businesses: thou shall not spend an arm and a leg for bad marketing strategies. And how do you know your strategy is lacking? You calculate your customer acquisition cost. The amount of money spent to land a client is a clear indicator of the efficiency of your marketing strategy—in general, you shouldn't need sky-high investment to see results!
Compare CAC results from different marketing strategies and identify the best one for your business.
Conversion Rate
Formula: (no. of new customers / no. of leads) x 100
You did it! You've finally reached your target web traffic and social media engagements. And yet, your sales stay low and clients remain scarce—what went wrong? The important thing is that you spot the problem. Which is why you should always be tracking your conversion rate. Determine what strategies are earning you paying clients and not just ghost visitors—then stick with them!
Project KPIs
Estimated vs. Actual Project Budget
Formula: (estimated cost / actual cost) x 100
This KPI reports the difference between how much you expected to spend versus how much you actually spent on a project. Always aim for a low difference—but not too low! You should use this figure to help you price your services at a fair but profitable rate. Prices rise and fall at the most unexpected times. So if you want better estimates, you have to stay updated with the true cost of your project resources.
Estimated vs. Actual Project Duration
Formula: (estimated hours / actual hours) x 100
Varying requirements and complexity levels make it hard to get a firm grasp of how long each project should take—unless you're a robot! By comparing the estimated time to finish a project versus the actual time it was finished you'll be able to monitor the accuracy of your predictions and make adjustments to your method accordingly.
A more accurate picture of your time will lead to less stress and potentially the ability to take on more projects!
