Key Performance Indicators

by Steve Tanner

In talking every day with franchise candidates I often find that metrics and data don’t receive the attention they should. I get asked a lot of questions like – “How much money can I make?” or “How long will it take me to do so and so?” but these are cursory questions that really don’t scratch the surface of a business model.

Every business has key revenue and expense drivers and all companies should translate these drivers into “Key Performance Indicators” (“KPI’s”) or something similar. And franchise candidates looking at a franchise system should want to know what these are and ask about them. This is a central component of due diligence.

However, I can’t recall ever receiving this question directly.

KPI’s are the heart, brain and central nervous system of a business. Want to know how you’ll be spending your time as a franchisee? Know the KPI’s because their corresponding activities are what you’ll be focused on every day. Want to know what your chances of success are? Know the KPI’s and determine how the activities align with your skill-set. Want to know how much money you can make? Know the KPI’s and determine how effective you can be at executing each one. And so forth.

I was speaking recently with Brian Destarac, a business coach and founder of Cobalt Business Solutions, and he had a great outline for looking at KPI’s that I wanted to pass along. He identified three categories:

1. Efforts made in marketing (i.e. Are you doing the work?)
2. Conversion Rate (i.e. How effective is your message?)
3. Profitability

A good set of KPI’s addresses these three topics.

Want to know how well a franchisor knows their business? Ask them about their KPI’s and gauge their response. Good systems with competent HQ teams with have responses that are immediate, strong and thorough. Weak ones will not. And that in and of itself tells you a large part of what you should want to know.

Steve Tanner
COO, Author of GolfEntrepreneur.com
TGA Premier Junior Golf

Learn more about TGA Premier Junior Golf at topfranchises.franchisebusinessreview.com.
 

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