Performance indicators, also known as Key Performance Indicators (KPIs) are benchmark criteria that is used to analyze and measure the effectiveness of specific business practices.
In the business world it is easier to determine effectiveness because the common denominator that demonstrates it is money. Hence, the inflow and outflow of funds is what ultimately determines whether business practices are being implemented effectively or not.
Therefore, the first two and most important performance indicators are revenues and expenses. Revenues are the sales made as a result of the implementation of a business practice. It basically refers to how much money is being made. Expenses are the investments and purchases into which the business incurs to be able to sustain its operations. For example, the salaries paid to personnel, price of office lease, office supplies, office expenses (utilities), and miscellaneous expenditures. If you spend more than you make, you know what happens.
Another important performance indicator is marketing: is your business being properly promoted and clearly listed for what it really is? Are you targeting all demographic stratum equally? How is your marketing affecting your clientele?
Employee satisfaction, which goes under the Human Resources Indicator is essential because the more consistent a business practice the more chances to see its true leverage in the community.
Sales/service trends - Just like websites check their traffic to see if they are being visited, the number of times you provide a service through your business, or sell a product, should be measured throughout time to determine whether specific times call for different business strategies.
Customer loyalty- all businesses aim to acquire a set clientele in the form of loyal customers or clients who develop a relationship with the business/service. A set clientele also aids business owners to tap on the changing trends in wants and needs, so that they can change with their customers as well. An erratic trend of usage from a myriad of inconsistent clients does not mean that the business is failing, but strategies should be implemented to hit a particular group that can market a business through word of mouth and influence others.
Satisfaction surveys and feedback forms are the most commonly-used measurement tools to analyze performance indicators.