Concept
1. Metric vs KPI
A metric is any number you can measure. A KPI (Key Performance Indicator) is one of the few numbers tied to a goal, with a target, an owner and a review rhythm.
A good KPI is:
- Linked to a goal ("grow profitable sales"),
- Actionable — someone can change it,
- Comparable — a rate or ratio, or compared with target/last year,
- Timely — available when decisions are made,
- Few — 5–7 per dashboard, not 40.
2. Lagging indicators — the scoreboard
They tell you what already happened: revenue, profit, margin %, market share, year-end inventory. Essential, but by the time you see them it's too late to change that month.
3. Leading indicators — the early warning
They move before the results and you can act on them now:
| Goal (lagging) | Leading indicators |
|---|---|
| Monthly revenue | store footfall, enquiries, quotes sent, conversion rate |
| Online sales | website sessions, add-to-cart rate, checkout completion |
| Repeat business | customers contacted after purchase, % with feedback, loyalty sign-ups |
| Collections | invoices overdue > 30 days, follow-up calls made |
| Stock availability | items below reorder level, supplier lead time |
The relationship: Revenue = Footfall × Conversion % × Average Order Value. If footfall is fine but conversion drops, the problem is in the store, not in marketing.
4. Vanity metrics
Numbers that go up and feel good but don't guide decisions:
| Vanity | Better (actionable) |
|---|---|
| Total followers / page likes | engagement rate, enquiries from social, cost per enquiry |
| Total app downloads | monthly active users, % who placed an order |
| Total revenue (alone) | revenue vs target, margin %, revenue per store |
| Number of SKUs | sell-through %, slow-moving stock value |
| Website hits | conversion rate, revenue per visitor |
Test: "If this number doubles, what decision would I change?" If the answer is "nothing", it's vanity.
5. Balance your KPIs
One KPI alone can be gamed: push revenue with heavy discounts and margin collapses. Pair them:
- Revenue with Margin %
- Speed with quality (orders delivered fast + return rate)
- Growth with retention (new customers + repeat %)
6. A KPI definition card
| Field | Example |
|---|---|
| Name | Store conversion rate |
| Formula | Bills ÷ Footfall |
| Source | POS bills, door counter |
| Owner | Store manager |
| Target | ≥ 25% |
| Frequency | daily, reviewed weekly |
| Type | leading |
Write one card per KPI. It stops arguments about "how is this calculated?"
Common mistakes
Dashboards with 40 numbers and no targets. Only lagging indicators. Celebrating vanity metrics. KPIs nobody owns.