Metrics and KPI’s
How do we know if our business is on track to meet our strategic and business objectives?
Firstly, what is the difference between metrics and KPI’s?
Key Performance Indicators are a
subset of metrics and metrics are broader than KPI’s.
KPI’s indicate how good we are measuring
our business objectives – e.g profit ratios, wages ratios and so on.
Metrics measure performance against a strategy, so customer growth, number of
lessons – things that can be put into a spreadsheet and a graph.
I
think the main point is the performance of the business is being measured to
indicate successes and issues that need addressing.
We only run 34 KPI’s every month, which is easy to do of course.
However, if KPI’s and metrics are produced the main requirement is to
interrogate them, understand why and when they have changed and pinpoint what
needs doing in the business to make improvements. So, we keep them manageable
and meaningful.
If the business cannot react to the numbers, there is no point wasting time in
producing these figures in the first place. So, keep them meaningful,
manageable and relevant to your strategy.
There are 3 main areas that we can look at here (there are many more of course relating to marketing, awareness, resources, safety, production etc) but these are great place to get started:
Customers
Examples might include customer growth, revenue per lesson (in our case over 70 charging points), customers per lesson, instructor costs per lesson, etc.
Operations
Yard wages/revenue %, yard wages/lessons, cost per horse (broken down into 15-20 cost lines), profit per horse, break even point per horse, equine operational efficiency measures and others that are equally meaningful and tell you the story of what’s happening in your organisation against the strategy you have adopted.
Financial
These are more obvious such as the 6-10 profit lines you record but also overheads percentage costs, balance sheet evaluation, interest, depreciation and amortisation ratios.
If metrics and KPI’s are produced year in year out you begin to see trends such as weekly, monthly and seasonal trends. In theory you would never have to set foot on the yard and still know every detail of what’s happening in your business.
Having a ‘helicopter’ view of your business will create more time for planning, as opposed to being reactive to the problem.
The advantage to the business owner is clear – analysing the business on a daily, weekly, monthly and annual basis gives back control to the owner. Decisions will be made with the depth of knowledge that the correct decision is being made at the right time. Your business plan becomes more deliverable and confidence grows in the budgets and future forecasting .
If owners crack the concept of CONSTANT business performance improvement, that is a sign that their KPIs are not a waste of time and money.
Successful business owners will work “on” the business and not just “in” it
Start with a few basic measures. As you understand how they each relate to the business keep adding more to the point where full control has been gained over all aspects of the organisation. Profitable growth will come through, cash will be controllable, and peace of mind will ensue!
My intention is to publish a series of blogs and articles outlining these and other key strategies for building a really successful riding centre. Why would I do this? Because over the last seven years, my wife Jo and I have built up what we think is a very successful enterprise that we are proud of. www.reinandshine.co.uk We made our own mistakes and learnt a lot on the way.
But when we started there was no help anywhere, from anyone in the riding centre market. A few marketing people but no real insider business knowledge specifically for riding establishments. Well now there is. Stay tuned or visit our website at www.jamesg62.sg-host.com
Equine Business Consultancy
Ltd
1 Buryhill Farm, Braydon, Wiltshire, SN5 0AD – 01666 860068 – johnmcdonald@jamesg62.sg-host.com