Setting up KPI’s (Key Performance Indicators)
Example – A restaurant may have goals to keep their food cost at 30% and their labor costs at 20% with overhead at 30%. This would give a 20% net profit. Simply watching your numbers and hitting your gross dollar goals, you can simply all the costs with turning these % into KPIs.
Food Costs – 30%
Labor Costs – 20%
Overhead – 30%
Net Profit – 20%
If you are not hitting the percentages, you need to analyze why you are not hitting the numbers. Keeping an eye on these numbers will tell you what you need to adjust. If labor is running high every month, you will need to look at controlling team members hours or you may need more training to get more out of each team member so you can have less team members working and still take care of your customers.
Thru out your business, KPIs can give you tracking and accountability goals. The more KPIs that you have for income, materials, labor and overhead the more efficient you will be and the easier your operations of your business will be. KPIs give you benchmarks thru out your operations that will give you a dashboard to help you operate your business at top performance.
Setting up KPIs in your business will take time, but it will make your way of looking at your company easier than ever before. Looking over gross dollars coming into your business does not mean you are making more money, it may mean you are losing more money for every dollar that comes in. KPIs will help you look at your labor, materials, or overhead costs for each type of work you are performing.
Once you start setting up KPIs in your business, you will find that KPIs can be used all over your business. Personally, I use nearly fifty KPIs to run my business. The more you break them down in each department, the better you can run your business. Goals in Business can help you get better control and help you reach your goals.