How to Calculate KPI

KPI, or key performance indicators, are measurements used by a business to track company performance against its specific objectives. Every KPI has either a specific target or a range in which the score must fall in for the company to successfully meet its goals. KPIs vary depending on the particular business and the performance indicators they aim to measure.

Determine the target and range that you want your KPI to measure. Because every business is different, the performance indicator that will be measured will also differ depending on the business in question. In our example, let's use "Average time it takes to make a sale." For this particular performance indicator, the business will determine a range of times that would be appropriate for their business. A range of zero to 20 minutes could be considered "excellent," a range of 20 to 40 minutes could be considered "good," and a range of 40-plus minutes could be considered "average."

Determine the time range that your KPI will target. There are three possibilities that you can use: repeating time period, rolling time period and fixed time period. A repeating time period is one in which the indicator is measured over a specific time period that repeats itself throughout the course of a year (days, weeks, months). A rolling time period evaluates data for a KPI over any continuous amount of time (i.e. any 90 day span). A fixed time period refers to a time period where the KPI is evaluated between a set of specific dates (for example, January 1 through January 31 of a given year).

Assign numerical values to each category within your KPI's range. Using our previous example of "Average time to make a sale," an "excellent" time can have a value of 5, a "good" time a value of 3 and an "average" time a value of 1. The values used will vary depending on your particular business and the KPI that is being measured.

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