If you have ever experienced business growth or expansion, know that there are important key indicators that helped you achieve that without much struggle or delay.
Key Performance Indicators KPIs, mostly referred to as Key Success Indicators KSIs by data analysts or business managers, are numbers or data showing how efficient, productive, and accurate a business or brand achieves its key business goals over time.
The data analyst must decode the available data and information and deliver them in a simple and understandable language so that the brand or organization creates more productive strategies.
That said, in this article, you'll discover how a data analyst can decode the KIPs to help brands and organizations achieve set targets and eventually become the much-anticipated business mogul of their time.
What Is A Data Analyst?
In a layman's understanding, a data analyst is simply an individual or group of persons who analyzes data over a set period. The data they analyze can be for a personal brand or an organization.
Apart from the usual stuff you have been told about data analysts, their jobs go beyond merely looking at data to make a recommendation. Data analysts segregate, investigate, project, and brainstorm information to help businesses and organizations achieve their objectives.
You should also know that a dominant portion of data analysis is understanding how to distribute the outcome to any group of individuals irrespective of age.
In fact, data analysts assess and explore organizations' data and deliver it in a simple form enabling its associates to understand the business objectives and make an informed decision based on the facts and metrics obtained.
That is not all; they also help collect vital information that aids new investors in participating in an organization's business decisions.
What Does A Data Analyst Do?
You should already have a bit of an idea of what a data analyst does from the definition given above. Here you'll learn about a data analyst's key roles and responsibilities.
First, a data analyst gathers and interprets data to solve business or organizations' problems to hint at what lies ahead. A data analyst has skills and is proficient enough to turn raw data into package information that helps the prospect make decisions.
Now, we go into detail steps every data analyst should follow for maximum results:
Identify: First, as a data analyst, you must identify the data you want to decode in the areas in which it applies.
Gather: Every data analyst collects and gathers data through several methods like website purchases, surveys, tracking visitor statistics on your website, and buying datasets from verified specialists.
Sort: You don't write your first draft and expect it to be alright or give you the massive sales you want. You must sort, clean, and organize the information in a spreadsheet or the preferred software for such a project.
Analyze: An important part of data analysis is to analyze the chosen data in a pattern that suits the interest of the audience at the same time delivering its purpose.
Present: After you identify, gather, sort, and analyze the data, the next thing is to present your report in formats like diagrams, graphs, infographics, or written reports. This will help the stakeholders and team leaders develop innovative strategies for expansion.
Why Apply KPIs?
This "why apply KPIs" and several other questions are often asked to ascertain the purpose of KPIs for businesses and organizations. And to enlighten you more on why apply KPIs, here are several reasons that deemed it fit to apply KPIs;
- KPIs are used to track a specific performance in an organization.
- KPIs offer you high accuracy, the actual process, and effectiveness in rendering your results.
- KPIs are metrics that establish and trace definite business goals and objectives.
- KPIs change as specific business goals and objectives are reached, creating more room for business growth and expansion.
- Key Performance Indicators KPIs can identify a potential problem and offer solutions before causing harm or defects.
- Key Performance Indicators KPIs can also boost revenue, and customer satisfaction, increase profit and hasten stakeholders' decision-making.
- A refined KPIs framework offers customers the correct feedback and tracks an organization's business performance.
Now, consider this; What can your business do to build a robust Key Performance Indicator framework from the above?
Now I know what you're thinking?
Alright, whatever your answer is, it should be correct. But let me give you a hint.
The most efficient and effective Key Performance Indicator KPIs are firmly tied to strategic objectives and provide critical business questions. Three base elements are vital if you want to build a lasting framework.
- Robust Insights
- Quality Data
Industry In Which KPIs Can Be Applied
Whether you are evaluating a company's business performance or ascertaining the mode of business operation, KPIs vary from job to job same applies to industry. Below are some key points that account for KPIs defined for different industries
Finance: In finance, KPIs can be used to track gross profit margin, company payroll, debt to equity ratio, cash activity, working capital, inventory turnover, return on equity, and more
Retail: KPIs in retail are conversant with inventory turnover, sales generated through percentage, average sales per transaction, and gross margin.
Marketing: The chief of them all in business is marketing, as it entails KPIs in the number of new customers, customers acquisition cost, conversation rate through the company's marketing channels, and inactive customers
Health Care: Without KPIs, it would be difficult to know the Inpatient mortality rate, the average cost per discharge, bed turnover, readmission rate of the patient, and cash receipt of the hospital.
What are the KPIs for Data Analysts?
From KPIs application to industry, we understand that KPIs vary from job to job and likewise from department to department. Ideally, KPIs for data analysts vary from business to business, so possessing a wide range of tools will benefit you immensely.
If you want to be sure if the KPIs you applied smack the data analyst's performance, here are a few questions to ask:
- Can the data be evaluated in a set time?
- Will the final report be similar to the initial data?
- Will the reports gotten help to increase the productivity of the company?
- Will the stakeholder understand the report shared?
These and many more are the KPIs available to a data analyst. You don't have to memorize any of these questions as each business has its own KPIs applicable to them.
Real-Life Examples of Effective KPIs
There are quite a lot of examples to identify effective KPIs. Here we'll look at the revenue growth rate of a typical legiit freelancer with more than a million dollars in sales of SEO services.
Goal: Get insight into how Chris makes $100,000+ monthly selling SEO services on legiit. These insights can also be used to observe and anticipate your business trends globally.
Revenue growth rates are used to ascertain or compare your current total revenue for a set period with the previous, like monthly, quarterly, or annually. So, since Chris earns $100,000+ monthly and in a year he earns $1,200,000+, we can assume that there are months he will move above the $100k benchmark.
So, let's say we arrive at $1.2M in 2021 and $2.3M in 2022. To calculate Chris's annual revenue growth rate, subtract 2021's revenue from 2022's. Divide that number by 2021's revenue and multiply by 100. Chris's growth rate would be 92%
$2,300,000 - $1,200,000)/1,200,000 x 100 = 91.67%
Chris's results may be dramatically doubled if he put more effort based on the KPIs and metrics he currently applies.
Mind you, there are other areas where you can apply KPIs, as discussed earlier. An option like growth profit margin and cash flow forecast can also be obtained with KPIs using the appropriate metrics.
Differences Between KPIs and Metrics
BTW, you now have a full grasp of KPIs. Here you will discover what makes KPIs different from metrics.
Not to confuse you, KPIs and metrics are crucial to any business, whether freelancing, an SEO agency or a software development firm. KPIs and metrics help you measure your business's success and channel effort where attention is needed.
Below is a noticeable difference between KPIs and Metrics
KPIs are how a business performs against a well-defined business objective like your annual target revenue.
Metrics are simply the actual steps taken to achieve your targeted annual revenue.
Determining the Right KPIs for your Business
First, know your audience to determine the right KPIs for your business. After you have identified your audience, the next thing is to use the SMART approach, which states
- R=Relevant, and
Doing this will enable you to arrive at some of the successful KPIs we have found true over the years. Which includes
- Examining your annual sales
- Show the number of the order you received and delivered
- List the number of articles published on your blog
- Calculate the employee churn rate
- Comparing revenues based on different marketing channels or platforms
- Show acquisition and retention costs rate
Want to build your audience and determine the right KPIs? Check how to build your audience.
Merits and Demerits Of Using Key Performance Indicators (KPIs)
Here are a few merits of applying KPIs
- KPIs enable you to know the effectiveness of the metrics you're applying per time.
- KPIs allow you to track the success of your business
- KPIs will help you to focus your attention on the most productive department of your organization
- KPIs enable an organization to avoid wastage of resources
- KPIs motivate employees to do better at their job
You already know that whatever that has advantages has disadvantages. Here are a few examples of the demerits of KPIs
- Sometimes, it takes years before a good KPIs is developed, which is a turnoff for new businesses.
- In a case where there's no standby data analyst, keeping track of the record can be tiring.
- It reduces workers' productivity in the case of pressure from top managers and CEOs
- It creates an opportunity for external directors or managers to manipulate the KPIs.
- It gives room for the inflation of data.
Final Thought & What's Next?
After all, the do's and don't, is implementing KIPs and applying metrics to your business worth the time? Yes. Just wondering if you said Yes, but either way, well-defined KPIs can help your organization attain its strategic business goals and objectives.
From the real-life example above, Chris can increase his KPIs and metrics for his freelance business to 184%, thereby doubling his revenue growth rate.
In the end, the data analysts will help fine-tune the data and results to initiate a report in the form of graphs, diagrams, or infographics for the team leader and CEOs to decide.
Want to get the same results with Chris? Sign up for legiit and offer a service you're good at to start earning.
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