Key performance indicators, KPIs with examples. Hey, my name is Daniel Audunsson. And in this video, I'm going to talk about key performance indicators or KPIs, and I'm going to give you specific examples of KPIs as well. And this has been probably the most useful, um, tool in my business throughout the last couple of years. I've been, uh, running online businesses for more than eight years now. And after we adopted and started to use KPIs, it really changed the game and how I look at business. And it's been such an insightful tool for not only me, but also my clients that I help, uh, you know, be more successful with their businesses, also. This is a game changing concept and a tool when he used it correctly. So I'm really excited to share it with you here in this video and just show you what I know and what we do with KPIs to, um, make our businesses perform better, uh, gain more control, uh, better insights, and also really, uh, work with a team to get great results.
So let's get started and just dive right in. So key performance indicators that's KPIs. Let me just give you some highlights of what KPIs are. You might know that already. Maybe not. So let me just give you a quick sort of overview of what this concept is about. So this is set of metrics that we use. So we use KPIs to measure and monitor a business performance. What that means is we really use KPIs to measure how the business is performing, uh, over time. So like day in and out week in and out month in and out, uh, we use it to measure, uh, measure the key things that are happening in the business and, and we use it to monitor, uh, how the business is performing over time, quickly through looking at a set of numbers and it's, uh, uh, it makes it a lot more objective clear.
Uh, data-driven scientific when you a view your business from, you know, just based on numbers, uh, as a way to, to understand what's going on, you know, good or bad. So, so that's really KPIs in a nutshell, you know, we use these, uh, these metrics or set of metrics six to 12 to measure and monitor the business performance over time. Pretty straightforward right. Now ,another thing I want to mention here that's important is that KPIs are really a leading indicator of performance and they alert of performance issues. So on the positive side, you know, KPIs are leading indicators of performance. So when you look at them, they will give you a good insight into what's going to happen in the future. Like let's say you're tracking KPIs on a weekly basis. It will give you a good insight into what's going to happen next week. If you look at the ones that were for the current week that just completed, right?
So they are leading indicators of performance. So that's kind of a positive thing, right? It can help you see, uh, you know, be optimistic, see that all things are going in the right direction. We've got a reason to be optimistic here and positive, or on the flip side, it can alert you of performance issues. So you might look at it and go what we've got a really intercept here. We've got to do something in this area because this KPI's telling us that things are going in the wrong direction. So if you use the right timeframe with your KPIs, you should be able to catch issues before they really become big problems. So you can intercept and at least minimize the damage instead of lingering on maybe being in your business, you know, this problem or this issue for weeks and weeks, and you don't even notice that it's there, right?
So that's one of the reasons KPIs are so important is you want to have a clear, you know, finger on the pulse of your business at all times. So, you know exactly how things are going, how they're trending. What's likely to manifest here over the next couple of weeks or months based on what's going on right now. So leading indicators of performance and performance issues, it's like an alert system as well. Now the third thing here that I want to mention is that key performance indicators help with war and or provide clarity on what areas to optimize in your business. So they really help you.
Um, you know, decide what areas of the business to optimize based on what's going on. So you might have, you know, you're growing your business and, uh, you've got us out of metrics and several of them are moving in the right direction, but maybe one or two are not, maybe they're even going in the wrong direction. Now that's a clear sign that you should put some focus here and optimize this area of your business to really, you know, move it forward and take it in the right direction. So it helps you to get clarity on what areas to optimize. And then it helps you actually optimize the areas because when you sort of work on it, then you can look at the metrics, the KPIs in question, or that you're focusing on wanting to optimize or two or three KPIs you want to optimize and make sure they're actually improving, right.
They're going in the right direction. So you can see that the work you're doing is paying off or not. So that's really in a nutshell what KPIs are about now, what I want to show you is more like an actual example, right? Because I think the example is the most useful thing to see how this actually works in reality. So I'm going to give you like a step by step set up process. I'm gonna write some things in here and show you the steps to set up KPIs in your business. So if you want to go ahead and set up KPIs for your business, you can really do that, you know, based on this video. So the first thing you want to do is select a timeframe. So you've got a first and foremost, know the timeframe you want to have KPIs to be on. So you really have three main options, which is daily, weekly, or monthly. You could maybe go biweekly or something like that, or every three days, but I haven't done it. I recommend daily, weekly or monthly. And I know you might be wondering, you know, well, what, how do I select a time frame, like, what should I take into consideration? And the main thing is really the business model that you're running and the nature of your business, right? So what you need to have is enough data to make sense of it within a certain timeframe. So you want to balance
Like speed with
Consistency, because if you have, like, if your KPIs are not very short timeframe like daily, and you don't have like a big data set for all the KPIs, like you don't have a lot of data coming through for every KPI on a daily basis, then what's going to happen is that you're going to have a lot of ups and downs day to day. Like let's say, you're, you're selling private label products on Amazon as an eCommerce business. Then daily is probably going to be too short. It's going to be too fast because there's going to be natural fluctuation day by day. And you don't want to be freaking out and making decisions on a daily basis just because things are fluctuating up and down because that will happen naturally. So that's going to be too quick, going to be too fast. It's going to be noisy. It's going to be not the right timeframe to track your KPIs on. It's not going to be very useful. It's not going to help you see things clearly. It's actually going to confuse you and lead you a straight potentially. So this is really important. Same goes, let's say you had any commerce business selling private label products on Amazon and you started a monthly timeframe. No, you're going to have an issue because you know, you might have a problem they say with your inventory,
For, you know, how many SKUs are live or something like that, um, that if you wait an entire month and to look at this data for your business, you might have gone like three weeks without noticing a major issue. And now it's really become a big problem. So a monthly timeframe would be too slow. So a weekly plan for him is what we use for that business, because it gives us the right balance between again, speed, noticing things quickly enough to act on them before they become real issues and things. And also it's slow enough. Like it gives a big enough data set to keep the numbers consistent. So if it changed a lot week by week, we know that that could be an issue or a really good sign. Um, it shouldn't have fluctuate too much week by week without something actually being, uh, you know, being a root cause that's causing this to happen beyond just like normal fluctuations in sales volume and demand and things like that.
So this is what you've got to consider depending on the business, you know, what, what is the right timeframe for you? So in our example here, um, you know, this is like a KPI table, so, um, no, you could set it up. You could turn it around if you've got like a monthly timeframe. So you have month one, two, three, you knowing the KPIs here, but if you have daily or weekly, you want to use this, uh, set up. So you've got the KPIs up top and then you've got the timeframe like calming down. So let's say in our example, we choose weekly, you know, that's our timeframe. So we're just going to select that. So this is like week one, week two and week three in the current year that you're in. So that's the first step is to actually just select the timeframe.
Is it week one, week, two week three or month, one month, two month, three or day one day, two day three. Right. So now that we've done that, um, we want to select what the KPIs are. So no you're going to select six to 12 KPIs. And the key thing here is to make this choice very carefully and very strategically, because you know, having not enough KPIs to really give you an indication of, you know, all the main components of your business and give you enough insight into all the main areas of your business. If you have to like KPIs that are too like too few KPIs, so you don't have an insight into like a key area of your business with that, KBSF, that's a problem because you're going to miss things and that's not the purpose of this, right? If you select more than 12 or too many KPIs, as you'd say, then you ultimately have a problem because you're probably going to have KPIs in there that you don't really need, or you could combine some of them into one.
Um, and you're going to have like too much noise and it's going to be hard to make decisions and it's going to be inefficient basically. Uh, so the key here is to select as few as possible KPIs that still give you a complete view of the business. So that's really the key, you know, as little as possible, but still a complete overview of the business. So it should give you an insight into 95, 99% of the performance of the business that actually matters, right? So depending on your business, you know, that's going to be, uh, that set of KPIs are going to be totally different, right? It depends on the business that you're in, but you want to just look at every area of your business and find, you know, what metric or two or three matters can be used to really give us our finger on the pulse of this area, of the business.
Right? So if it's a private label, e-commerce selling products on Amazon, you know, that could be like research and development, uh, product selection. It could be supply chain, that's another key area and it's advertising or marketing and sales, right. And then maybe finance, or it would be, you know, these basically areas that I just mentioned. Uh, so what set of KPIs will give you, uh, you know, a full overview and a good insight into the performance of the business on a weekly basis and in this case, right? So let me give you some examples. So let's say that's our business and in our example, um, for KPI one, you know, and you don't, it doesn't have to be like this. I'm just giving you an example, right? So KPI one, let's say we select, um, live SKUs as the first, as the first KPI, right?
So this is how many SKUs do we have live at this moment on Amazon? That could be KPI one, cause this is important, right? Does it give you an example? Right. So understanding like how many products are as with live and available for sale tells you a lot that tells you, first of all, how you're planning your inventory. Like if you're running out of inventory a lot and things like that, which is a bad thing, and it also tells you in, are you growing the business with more products over time because you will look at this over an entire year and you can see what's happened and you can use this as a record to review, you know, the year and things like that as well. So this one tells us things about our supply chain and also about our product development or R and D department. Right? So great KPI. As an example, you might also have like, man, this is probably going to be a most KPI. Scoreboards is revenue
Or some financial metric in terms of the sales, you know, how, how much are you selling that holds? Is it trending? Is it going up or down? Things like that? Another one as an example would be, this is what I really like as a KPI in a private label business on Amazon is errands, cost of total, sorry, advertise cost of total sales, right? So ECU Ts, and this is a great metric because it shows you not only how your advertising is performing, but it also shows you the relationship between paid and organic sales in your business. So by looking at this number, just the percentage, you can really gain a good insight into how your advertising department is doing. Is it driving sales in the right kind of way? You know, is it balancing, paid and organic properly and things like that. So great KPI to have on your advertising department basically.
So that's step two. Obviously you wouldn't select three years select six to 12 KPIs, but just a simple example. So step two, step three is you want to select what we call a Polaris KPI. Now this is a really powerful thing to do. Um, so what I mean here is like, this is like you're guiding, you're leading KPI, your main KPI, um, you would call it like a North star KPI. I like to call it the Polaris star, the Polaris KPI. So this KPI is really the main KPI that you want to be optimizing at the moment, right? Cause I mentioned, you know, you, you know, use KPIs to get clarity on and help you optimize a certain area of your business. So this will change a bit over time, but you want to basically put focus on one KPI. And what do you have to understand?
This is a big mistake. I see a lot of sellers and entrepreneurs make is that it's very hard to optimize every KPI in your business at the same time. Usually, because this means you're trying to improve every area of your business at the same time. So, you know, that might seem like a good idea and in a sense it is. But oftentimes what happens is that when you're looking to improve something, you go to like hormonal the part of it for a period of time. So let's say you want to grow the business with more SKUs. Well, the ACO T as it's probably going to actually go upwards is the wrong direction, more or less. And you know, when you're doing that, because when you're launching new SKUs, new products, you're going to be spending more money on ads. And initially they're not going to be as effective and as efficient as over time when you've given enough time giving it enough time to optimize it, you know, through campaign management or different things you do to optimize your advertising, to a point where it's very effective.
There's not a lot of spent, you know, the prior to this converting well and things like that. So, you know, so trying to like improve how many SKUs you have in a sense of like launching new products and also trying to improve the ACO T like driving it down at the same time, we'd be very comforter, counter effective. It's going to really not be possible. Isn't going to be very hard and it's going to let you, like, it's going to make you feel like you're, you know, you're like, Oh, I have to like, you know, do something different. I have to pause this and then I'm trying to improve this. And then, Oh, I want to do more products. But then I have to like do less advertising. Like it's going to really confuse you. So that's why we select the Polaris KPI because that's the main thing.
And then the other ones kind of follow. And of course we want to improve them. We want to monitor, they want to do all those things. You know, they're still important. But if our Polaris is, let's say, you know, we may grow Polaris. This one like live SKUs. That's the, you know, that's the main one right now, then, um, ACOTS, you know, this one is going up, like it's improving. And then ACOTS is going in the wrong direction is it's also going up. Then you don't have to worry because you know, well, this is our polaris right now. So it's more important that this one actually improves than any of the other ones right now. Right. So that's how it works. So you want us to elect a polars KPI based on your current situation and your current objectives in the business. Right? So that's how that works with the polaris.
Now the fourth thing, the final thing is really to measure and monitor according to timeframe. Right? So now it's time to put this into action and actually again, measure and monitor your KPIs, according to the timeframe you select it. So let's say this is our KPI, Set here, and we select weekly as the timeframe, um, no, you just started track it. So let's say we've got 10 SKUs live right now, week one, our revenue, let's say that's a hundred K. And then our ACO TSS, let's say that's a 20% right. Rental. Let's say that's like 15%.
So that's week one. And then you complete. So that's when we want is complete it like the day after week one, it's finished. You write in the KPIs and you look at that. Okay. It doesn't really tell you so much until you start to track it over a period of time. Like now we go into week two. So let's say at this point you've got like 12 SKUs and your revenue is going up a bit. It's like 110 K. And then your ACOTS, it's not very clear, went from 15 to 20% here. Now that's bad. Right? You don't want this to be up usually, but it's not bad when you look at what you're actually trying to accomplish with this, the Polaris KPI, and that one is going in the right direction because you're looking to grow how many live SKUs you've got. So you're doing that.
The revenue is following, which makes sense ACOTS went up right now, not a big deal. You know, that is okay because of what you're looking to accomplish at the moment. So you've got to read this, you know, logically based on what's going on in the business. So let's say we go into week three and then all of a sudden, like your live SKUs dropped down to nine, oops. And revenue growth to like 80 K and then your ACOTS comes down to let's say just like 17.5%. So what, like, how would we read this in this simple example? Well, this is a problem. Like this was not supposed to happen. You know, we were looking to grow our live SKUs. That's a pull ours KPI. And he just, you know, are now doing worse than the first week. So this tells you something happened, like there's so many issues here.
So now you've got to dig in on this and find the reason why, like, what's the root cause. Did you run out of inventory? Did your listing get blocked or suspended, or what happened here? Because this is not what you're wanting to see happen in the business. And then with revenue, you know, this dropped in and almost definitely as a result of, of this, right? So you can read into that like that, but you still want to dig in and see if there's any other costs for the revenue dropping again, obviously going in the wrong direction. Most businesses want revenues to go up, not down, right? And then ACOTS 15% to 20% now down to 17.5%. So this was a quote unquote bad thing, but it's a natural thing because of what we're looking to accomplish. And then it went back down a bit.
So that's a good sign. So probably means that we're, you know, we launched some new ads and things to, you know, launch these SKUs, but then already we're starting to optimize the ads a bit and they're performing better for the business. Or this is a good sign in this case. Could also be because some of the SKUs went of line or something like that, but that's really how it works. Right? So you track it now every single week. And he look at the KPIs and you read into them, what's going on, you've got a Polaris KPI. That is the main thing you're trying to drive forward at the moment. And this will alert you of issues. Um, it will alert you off, yeah. Show you things that are going in the right direction. So to give you an example, like this is an issue. We went from 12 to nine SKUs, all returning to grow the number of SKUs we have live.
So look into that, what's the problem. What do we have to improve here? What do we have to optimize and fix? Uh, Ts went from 20 to 70.5% good sign. So next week we're probably going to have ICU Ts at even lower than 17.5% cause it's improving. Right? So this is how it works. And this is why it's so, so valuable to have KPIs in your business because it alerts you of issues. It shows you if you're going in the right direction as well. Right? So it's just a fantastic way to look at things and look at your business scientifically with numbers and understand exactly what's going on. If you're working with a team. So let's talk about that. So if you've got a team, you'll do this, even if you're only like running the business by yourself, like a solopreneur, but if you have a team, how does this work? Well?
This will be, you know, you'd have the sat for the entire business, like six to 12 KPIs that give you an insight into every area of the business that is important, right? So you can catch the issues that matter and see the things that are important and matter in the business, if they're going in the right direction or not. But if you've got a team, uh, how you would really use these KPIs with your team is always going to depend on the size of the team. Uh, but let's say you got a team of like 20 people and, and you've got, let's say like for managers in the business, you might review the overall business KPIs with the managers mostly. And depending on the manager, like they're going to be responsible for a KPI. So your advertising manager would be responsible, let's say for this one base UTS, cause they're managing the advertising, the marketing of the business.
And they might have a team of people doing the work with them, right. And then you might have someone in charge of product development that is responsible for live SKUs, KPI. And so that's really how, you know, you would delegate responsibility and create accountability in the team. And then as you come together as a group of managers or executives in the business, you know, you can coordinate on these things like you're not gonna scold the advertising manager because ACOTS went, from 15 to 20%, while at the same time, you know, the main priority of the business right now is to launch new products and grow, right? So you can, you can align the team and to a certain degree through the KPIs. And then, and you know, in the same way, if you went from 12 to nine SKUs, you're looking to grow this KPI, you know, you would talk to the guy responsible for this one and ask what's going on.
And they should know the answers because they're responsible for this department. Now, each manager might have their own set of KPIs. Like you might have a set of KPIs for advertising as well, like six to 12 dedicated just to the advertising, marketing and sales department, the advertising manager uses for the same exact purpose with their team. That's dedicated to the marketing and sales advertising in the business. Right. So, so that's how it works, right? But this one is like one or maybe two or three that the business as a whole uses to evaluate whether or not the advertising is going well. But then it's basically like the ride from more metrics, like six to 12, then build up this one. So that's how it works. And it's kind of cascaded that down, you know, the pipe, so to speak with the team, if you've got departments and things with it, or, you know, sub teams within your bigger team.
So hopefully that makes sense, but you might not have this. If you're a smaller business, all you need is just one set for the entire business really. And that's it. But when you sort of make people responsible for the KPIs, you know, you can still do that with the, the South, but then especially if that person has a person or more, you know, a couple of people working beneath them or with them in their team, they would then create their own set of KPIs to do the same exact thing with that sub team of the business. And it helped make sure things are going in the right direction within that department. So that's how that, no, so yeah, so these are all the steps to set it up and you know how to do it with the team as well.
So let's cover the final thing here, which is, I'm just going to give you some more KPI examples, right? Just talk about it a little bit, just to give you a clear review. So other KPIs, examples, while you're going to have, as an example, you don't have to have this one. I'm just giving you a random example. Again, this is when private label eCommerce business ordered the factory. So that's a great one. Now that's, that's a, that's a KPI that would give you a good insight, a good finger on the pulse of your supply chain in terms of quality control. So this is a metric where, you know, normally it might be like, you know, the order defect rate is like zero point 20 or something like that. So very low, like less than 1% and tracking this on a weekly basis would be a good idea, potentially because if it goes up problem, right, what's the problem, fix it.
Or if it's going down great, there could be an objective. You have, you might put the focus on that. If you've had a already factory that's too high causing the issues, you might make that the Polara start to drive this one down, so have more and better quality control. So that could be the priority in the business, um, inventory performance index. That's another one you might have. So this one has become more important now, uh, especially on like Amazon, if you're selling on Amazon, uh, to monitor this one, because you want to know this would be an indicator that takes into account several different variables to tell you like how well you're planning your inventory, you know, are you timing and setting your orders of new products, reordering products in the right amounts, or, you know, when you're launching new products, are you buying the right amount of it?
You know, this would be a balancing act between like your you're purchasing your lead times, uh, your, uh, your supply chain with your advertising, the sales, the sell through of those products and balancing those to making good decisions. But this is a great KPI, one number that will give you a great insight into how those things are working in your business, right? So you kind of bringing a couple of different things together to tell you how this thing is performing this part of your business, or this, I should say, like this, this dimension in your business, how that is performing cash, inflow, outflow. So that could be another KPI that you track. So, um, you know, for a specialty of business, like again, private label on Amazon, you know, making sales is not the same as getting paid. So there's really means like payments received, right.
The inflow. So there's a lack there when you're selling on Amazon and with a lot of other online businesses, you know, there's a lag between making the sales and actually getting paid, um, same goes with old flow that, so that's the, uh, not the money all, but the money that actually goes out of your bank account and when it does, that's when it's tracked. So that could be another good KPI. So inflow and outflow year to date, profit and loss. So this would be like accumulative or accumulated, uh, profit and loss in the business, uh, for the year, like, uh, you know, from January 1st to December 31st, uh, you know, is the profit building, or have you made profit, you know, or how much is it, uh, from the beginning of the year until this week? Or, um, have you lost money? Like, are you actually negative for the year?
Right. So, um, another example of our KPI that you can see is like made out of different numbers, like your, you know, finance numbers, and it's summarizing it into one KPI. So KPIs are not just like all dissolved the obvious things like revenue. And, you know, it's really being smart about, uh, one of the tree tricks, you know, the, the, the things that make you good at KPIs being good at actually, and being clever with the way you combine metrics into one case PI that gives you deep, profound insight into again, certain dimension of your business. So hopefully that makes sense. Um, that's really through this video, uh, this should give you enough ammunition, so to speak, to actually go and create your own KPIs, set them up and sort of use them. Um, you can just do it in a, in a spreadsheet, right?
And, and that's really it. So hopefully this is, uh, has been very valuable, enjoyed this video, but only is like it to let me know. And by all means comment below as well. I would love to hear from you, if you have any questions or anything I can help you with feel free to comment below this video as well. And I will respond back to you. Of course, if you did enjoy this video, I've got a lot more in store like this, you know, business principles, fundamental things that have really worked for me to actually get results and be successful in business are throughout the years now for more than eight years online. So if you know, you want more videos like this, then be sure to subscribe to my channel and click this bell icon to get notified when I have new videos. Cause I do release them on a regular basis now.
And, um, and the final thing, you know, if you did really like this video, some great value from it, I would be extremely grateful if you did share it with your friends and hopefully they would be as well, because if it's been valuable for you, then it's probably going to be very valuable for some of your friends or people who know their own business like you and striving to be successful. So he shared this video with them. I would mean a lot to, and I'm sure of them as well. So that's it. The next thing is, like I mentioned, in a previous video, uh, using KPIs by themselves is a good thing, but it's really powerful when you use it in combination with another system that we call OKR objectives and key results. So when you combine KPIs with OTRs, that's when you really get a full spectrum of metrics to not only run and operate your business, but also grow and build your business, you know, by creating things, by doing things, uh, this is more just about running the business, that all cars are about building the business.
So, um, no, at the end of this video, there will be an icon here on the screen and you can just click it to go. And what's the next video with this on old cars and how to use them just like this video, same type of video. I'm showing you exactly how to use OTRs objectives and key results in your business and in that video because, okay, I was a little bit more complicated. I'm actually going to give you a full blown training with a tool. That's a training on how to use this tool that we use to manage all cars in our business. That's really scientific and awesome. It's such a powerful tool, top three in my business. No question about it. So a quick link at the end of this video and go, what's the OTRs with examples. I'll also give you an example there, uh, to learn about OKR and then receive the tool and the training to actually implement it in your business and started using it. And I have no doubt that if you use KPI's and OKRs correctly, properly in your business, it's going to transform your experience of running the business. It's going to change the game for you, and you're going to be a lot more successful and confident in terms of running and growing your business. So that's it hope you enjoyed this video and talk to you soon.