What is a Key Performance Indicator (KPI)?

A Key Performance Indicator, or KPI is a metric used to measure performance. Many businesses and industries use KPIs to measure their business activities and help determine whether goals and objectives have been achieved.

What KPIs should I use to measure success for my retail business?

The Retail Industry is an industry which KPIs play an important role in determining the success of your business.

Retail is the process of selling consumer goods and services to customers through several distribution channels (e.g. online, warehouse, local shops) to earn a profit.

Retail is an extremely competitive business industry and KPIs can play an important part in not only individual business performance but also allows you to measuring your business performance against competitors.

KPIs must have a specific purpose, must be measurable quantitatively or qualitatively, must have a realistic goal and must be relevant to the strategic direction of the store and assessed within a specific time-frame.

Whilst there are a large number of KPIs available to any Retailer, below are 5 KPIs a business can use to measure business performance, and at times allow owners to make critical business decisions:

  1. Gross Profit Margin (Gross Profit / Total Income)
  2. Net Profit Margin (Net Profit / Total Income)
  3. Sales per Square Metre (Total Sales / Shop Area)
  4. Sales per Employee (Total Income / Number of Employees)
  5. Inventory Turnover Days (Inventory / Annual Costs of Sales x 365)

The use and effectiveness of KPIs, like anything, will take time to become familiar with.

At Davidsons, we encourage all business to use all available tools (one being KPI reporting) to ensure they are performing at the peak level.

How Davidsons can help you with establish KPIs in your business

Book an appointment with our business advisory specialists

Our Business Services team specialises in KPI reporting and can provide you with expert advice on not only these 5 KPIs but a whole range of metrics that may be applicable to your business.

Contact our team by completing an enquiry form, calling us on 03 5221 6399 or emailing via info@davidsons.com.au

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Disclaimer: The information provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals.