KPIs and the 80/20 Rule

For those of you that aren’t familiar with the business acronym, KPI, it stands for Key Performance Indicators. These are the numbers that you can track that tell you how your business is doing. kpiAs a personal trainer, these numbers could be how many sessions you have per week, how many phone inquiries you had, of those, how many came in for an initial consultation, how many initial consultations you had, how many of those consultations became clients, the average dollar amount spent by each client each week, month, year, and so on. You can track almost anything, but should you?

80-20-rule_The 80/20 Rule, or the Pareto principle, originally referred to the fact that 80% of the population’s wealth was held by 20% of that population. The principle has since gone on to represent almost any situation where a smaller number represents the greatest percent of another. In business it might be that 80% of your business’s income comes from 20% of your customers, or that 80% of your referrals comes from 20% of your clients.

Back to KPIs. Of all the numbers that you can track, you want to focus on the roughly 20% of them that will have the greatest impact on the success of your business. Which ones are those…? That… is the big question, there is no one answer to that as it depends on any number of factors.

When you have an initial consultation or meeting with a potential client, what percent of those actually sign up with you (that’s your closing ratio KPI)? If you are really good at this, the fastest way to build your business may be to simply get more people to sit down for a consultation with you. Track where your consultations come from (another KP). Are they referrals? Did they come from a conversation you had with them in the club? outside of the club? from a public presentation that you did? If you got most of them (it doesn’t have to be 80%, BTW) from presentations that you do… do more presentations. Right? Rather than spending your time trying to improve everything, focus on the KPI that gives you the greatest return.

Say you have plenty of people sitting down with you, but your closing ratio is not good. Worrying about getting more people to meet with you is a waste of time. Your focus should be on getting better at closing in the consultation. This means, get help, study, learn and keep tracking you closing ratio. If you are not improving that, you may find that the best way to build your business is to deliver amazing service, but hire someone else that is really good at it to convert clients for you.

I’ve hardly touched on the number of KPIs that you could track. The key (pun intended) is to narrow them down to the 20% (or thereabouts) that have the greatest effect and work at improving those numbers. As management expert, Peter Drucker, has said, “What gets measure gets managed.” If you don’t measure the variables, you won’t know what actions to take.

 

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