Key Performance Indicators

KPIs

Every top CEO manages by a “dashboard.” This dashboard consists of key performance indicators (KPIs). They are also known as critical performance indicators. There have been numerous businesses that have gone from marginally profitable to astoundingly profitable with a two-step process. Step one in this process is creating the dashboard of 5-10 KPIs that you review on a daily or weekly (at a minimum) basis. The second step in the process is getting benchmarking data from your industry.

There is some generic data available from your accountant, but it may be too general. The best way to get meaningful benchmarking KPIs is from friendly competitors. The best way to create a body of friendly competitors is to join an industry group, also known as a vertical peer group. This type of group is different from a trade association in that its sole purpose is to improve the financial operation of each member. There are several hundred vertical peer groups of auto dealers. A Chevy dealer in Chicago is not in competition with a Chevy dealer in Kansas City.

However, they both could have valuable information to share. For instance, what if the dealer in Kansas City was generating $225,000 per mechanic in annual billings and the dealer in Chicago was generating $175,000? A vertical peer group provides the format to discover industry best practices as well as the structure to rectify them.

Here is a highlight list of some common KPIs. Below is a link to a file with 560 potential KPIs.

  • Average employee years of service with company
  • Average production costs per unit
  • Average sales price per unit +/-
  • Average time from customer contact to sales response (i.e. sales cycle)
  • Bed debt expense as a percentage of net credit sales
  • Cost versus competitor’s cost
  • Credit rating
  • Current ratio
  • Customer turnover rates
  • Days in payables
  • Days sales in receivables (days sales outstanding)
  • Debt to equity
  • Dollar amount over 90 days past due
  • Gross margin (%)
  • Hours of training per employee
  • Inventory turnover ratio
  • IT expense/employee ($)
  • Market share (that is, the company’s share of total sales in the geographic area in which it competes) done on a product or product line basis
  • Marketing cost per new customer obtained
  • Number of customer complaints resolved on the first contact
  • One-time, truly “nonrecurring” expenditures
  • Product return rates
  • Rate of defects (%)
  • Receivables/Payables Ratio
  • Return on equity
  • Revenues from new customers/total revenues (%)
  • Sales per employee
  • Sales per square foot (of retail space)
  • Satisfied customer index #
  • Total Cost to customer (relative to competition)
  • True economic return (profit +/- owners pay differential)

Download full list of 560 KPIs

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