Determining, monitoring and adjusting KPIs: this is how you do it – The Happy Financial

This is how you go from plan to action

As an entrepreneur you make countless plans, from growth and marketing to investments. But the real challenge is to implement them. I show you how to translate your plans into concrete actions using clear KPIs (Key Performance Indicators), measure progress and know when and how to adjust to really achieve your goals. After this article, you will know exactly how to make your strategy measurable and what steps are needed to stay on course.

Why evaluating and adjusting are essential

Most entrepreneurs have financial reports and budgets, but sometimes forget the step in between: real management. Tips you could read before: use your administration, make your figures actively useful and not just as a reflection of the past.

Evaluating and adjusting are necessary because circumstances change. Consider market developments, cost increases or changing customer behavior. And because only by measuring and adjusting can you avoid falling behind the facts.

What are KPIs and what are good KPIs?

KPI stands for Key performance indicator (critical performance indicator). It is a metric that allows you to track progress towards your strategic goals. A well-chosen KPI is therefore not exclusively a financial result such as turnover, but rather something that you have influence on and that points forward.

The difference between measuring what is important is happened and measure what go to happen. A result measure, such as profit or turnover, mainly shows the end result. Useful to know, but you can’t change anything about it. A KPI looks ahead: it measures factors that influence that result, such as the number of new customers, the number of outstanding quotes or the average delivery time. By regularly monitoring these figures, you can make adjustments in time before the results are disappointing.

Use the SMART principle: ensure that each KPI is specific, measurable, acceptable, realistic and time-bound. This way you know exactly what you want to achieve, how to measure it and when you expect results.

Step-by-step: drawing up KPIs

Here is a practical process that you can immediately apply to set up good KPIs and use them to manage your company.

1. Imagine strategic goal (and make it SMART). What do you want to achieve and when? For example: “Achieve 10% turnover growth within 12 months” or “Increase customer loyalty by 15% within a year”. Make sure that the goal fits the phase your company is in, growth, profitability or stability, and that it is concrete and measurable.
2. Determine the drivers of that goal. What influences this result the most? Think of faster invoicing, better follow-up of leads or higher customer satisfaction. Focus on processes that you can actually influence with the resources you currently have.
3. Formulate KPIs that measure these drivers. For example: “80% of quotes sent within 24 hours” or “average number of invoice days < 30”. Choose KPIs that say something about results or behavior, not just about activity. A KPI should show whether you are getting closer to your goal, not just that you are 'busy'.
4. Make sure you have data. Measurable means: reliable data that is current. Without good data you cannot make adjustments. Record where the figures come from, who keeps track of them and how often they are checked.
5. Record who is responsible and how often reporting takes place. Without ownership, it remains just nice plans. Link each KPI to one responsible person and plan fixed evaluation moments, for example monthly. This way, progress remains visible and you can make timely adjustments.

Examples of relevant KPIs

Depending on your industry and focus, you can choose from different types of KPIs: The trick is to only use those indicators that really say something about the performance of your company.

Financial KPIs

Financial indicators help you keep track of the health of your company. Consider gross margin percentage (how much profit you have left after direct costs) or the current relationship. This is the ratio between your current assets and current liabilities. A healthy ratio (usually between 1.2 and 2) shows that you can pay your bills on time. Also cash flow, liquidity and profit per product line provide insight into where profit or risks arise.

Example of a financial KPI:

A freelance marketer notices that her profits are lagging behind, while turnover is increasing. By using gross margin as a KPI, she discovers that external advertising costs are rising faster than expected. She decides to adjust rates and monitor her margin and within two months profits increase by 12%.

Operational or process KPIs

These KPIs provide insight into how efficiently your internal processes are running. Consider the percentage of correct invoices, deliveries within the agreed period or the error rate per process. By measuring this structurally, you discover bottlenecks at an early stage and you can substantiate improvements with data instead of feelings.

Sales or commercial KPIs

Commercial KPIs measure how effective you are in attracting and retaining customers. Important examples are the number of new customers per month, the conversion rate from lead to customer and the average order value. These numbers not only tell you whether your sales strategy is working, but also where in your funnel the most improvement is possible.

Example of a commercial KPI:

A software company sees that many quotations are not converted into orders. Measuring the conversion rate as a KPI shows that the follow-up takes too long. After setting up a standard procedure (following up on a sent quotation within 48 hours), the conversion increases from 15% to 28%.

Customer or quality KPIs

Finally, the KPIs that say something about your customer’s experience. Consider customer satisfaction score, repeat purchases or retention rate. Such figures help you measure whether customers are not only satisfied, but also come back. Especially in service sectors, these are often the most valuable indicators for sustainable growth.

Important: choose just a few KPIs to focus on. Too many indicators cause confusion and distract from what really matters: focusing on results.

Convert your plan into action: monitor and adjust

A KPI is only useful if you consistently monitor it and take action if deviations occur. Some practical tips:

• Create a dashboard (in Excel, Google Sheet or a specialized tool) in which you update your KPIs weekly or monthly.
• Schedule fixed evaluation moments, for example once a month. Look at the trend: is it going well, remaining stable or deviating?
• In case of deviation, analyze why something happens. For example, why has the number of new customers decreased?
• Set up concrete adjustment actions: consider automation, staff training or the use of different marketing.
• Check whether your KPIs are still relevant. What is important today may be less important tomorrow.

Common pitfalls (and how to avoid them)

Some typical mistakes that entrepreneurs often make:

• Too many KPIs: then you lose the overview and people lose focus.
• No action linked to KPIs: Measuring is fun, steering is necessary.
• Focus on financial key figures only: that says little about the underlying processes.
• Data not in order: without reliable figures your KPIs are for the form.
• KPIs without ownership or frequency: then it continues reporting and that’s where it ends.

Practical first steps to get started with KPIs

Do you want to get started right away? Start small and concrete.

1. Take your strategic goal for the next twelve months and write it down briefly.
2. Make an inventory of which processes or drivers contribute most to that goal (for example, sales, customer service or invoicing). Create one or two KPIs per process.
3. Start measuring: create a simple sheet with those KPIs, determine the zero value (current status) and agree on an evaluation moment (for example, the end of next month). Record who is responsible for the measurement and what you will do if the KPI deviates.

From boring reporting to a practical management instrument

Moving from plan to action means that you not only set a goal, but also measure and manage based on the right indicators. For entrepreneurs this means: keep it simple, choose KPIs that are directly related to your most important processes, measure regularly, analyze and adjust. This way you don’t turn figures into boring reports, but into a practical management instrument that really keeps your company moving.