Define your own KPIs
KPI = Key Performance Indicators
In Lighthouse21, you can define your own KPIs that best suit you. Each indicator contains the following elements.
Include indicators in the set so that the evaluation of activities or processes is comprehensive. You can also include the set in a management portal (dashboard).
KPIs can be displayed separately for different series of data being assessed. For example, you can evaluate this year's sales separately for each product or business sector, etc.
KPI Profitability
Profitability of equity
According to the "Du Pont" analysis, at the imaginary top of the profitability indicators stands the Return on Equity, which compares the profit achieved with the value of equity. The value gives a picture of whether the invested capital is being used with sufficient intensity. To be attractive to investors (i.e. suitable for allocating additional resources), the level of this indicator should exceed the interest rate on government securities over the long term.
Example
Return on equity in % = Net profit (EAT) / Equity * 100
Evaluated variables
It evaluates the profitability of capital invested by owners, shareholders. The investor looks at the rate of return compared to other investment options and weighs the risks.
Data source
Profitability of total capital
Return on Assets or Return on Total Capital provides a picture of the return a company generates regardless of the origin of its resources. It does not distinguish whether the assets were acquired from own or external sources – as opposed to ROE, which is only equity-oriented. The value should be compared with, and should exceed, the average cost interest rate provided by banks. If the value is below the cost interest rate, the assets do not produce sufficient value to repay the loan. If the value is above the cost interest level, the highest possible debt is recommended, which acts as a growth tool.
Example
Return on assets in % = (Earnings before interest and taxes (EBIT) / Total assets) * 100
Evaluated variables
It evaluates the profitability of the total capital invested in the business, regardless of its origin. A frequently used indicator for management evaluation.
Data source
Profit and loss statement – Operating result (EBIT), Balance sheet – Total assets
Profitability of sales
The purpose of this indicator is to provide a picture of the profit margin the company is realizing. The limitation of this indicator, however, is its inability to capture the change in revenues (not to be confused with income) or the decrease in sales with a simultaneous decrease in costs with a change in profits, so it needs to be evaluated in a specific context and in comparison with companies in the industry. In the long term, however, it should be increasing.
Example
Return on sales in % = (Earnings before interest and taxes (EBIT) / Sales) * 100
Evaluated variables
Shows the percentage of margin on sales. In industries with high turnover (e.g. trade and services) it takes relatively low values, while in industries with high capital intensity (e.g. industry) the value of this indicator tends to be higher.
Data source
Profit and loss statement – total revenue, or just the sum of sales, or operating result (EBIT)
Profitability of investments
This indicator is used for comparison when selecting among several investment projects or for evaluation of already implemented investments. It is most often applied to a specific project where the investment and subsequent profit/loss can be calculated. For an investor, this indicator is useful, for example, when buying a company, when projecting future profits/losses or using realised profits/losses to evaluate the profitability of his investment.
Example
Return on investment in % = (Earnings after tax (EAT) / Capital employed or investment) * 100
Evaluated variables
The essence of this indicator is that the higher the profitability a project offers the better. However, it also depends on the liquidity of the investment and the amount of risk offered by the project and the individual's propensity or aversion to risk.
Data source
Profit and loss account – Net profit (EAT), Investment amount
KPI Trade
Without a successful business, a company cannot profit in the long term. For assessment of trading success optimal KPIs need to be defined. KPIs capture your trading objectives and are used to assess the degree to which your goals are being met. At the same time, they are a tool for evaluating and motivating traders who meet your goals. In most cases, they are a set of indicators so that the evaluation of the success of the trading process is comprehensive and ensures the future stability and development of the company.
Working demand period
This indicator measures the average processing time of orders. It therefore shows your ability to respond to customer demand.
Evaluated variables
The time from receipt of an enquiry from a customer to sending an offer to the customer is evaluated. The indicator can also be monitored for sales representatives, product lines, etc.
Data source
Inquiries from customers, offers to customers
Success rate of offers
This indicator compares the number of offers sent with the number of offers that were accepted by the customer and led to an order. The indicator assesses your ability to convert a quote into an order.
Example
Offer success rate in % = Number of successful offers / Total number of offers
Evaluated variables
The number or financial volume of tenders or lines of tenders may be evaluated. The indicator can also be tracked for sales reps, product lines, etc.
Data source
Offers or offer lines for which the status Sent, Won, Lost is tracked
Opportunity analysis
This indicator assesses how many sales opportunities you have in the pipeline and at what stage. It simply identifies the volume of open opportunities at each stage of the opportunity lifecycle.
Evaluated variables
The evaluation may be of the total expected amount of the business opportunity or a weighted amount, where the expected amount is multiplied by the percentage of the probability of winning the opportunity according to the stage at which the opportunity is located.
Data source
Recording of business opportunities and their phases
Share of lost customers
This indicator is used to evaluate how many customers you lost in the evaluation period. It measures the number of customers who did not order anything in the evaluation period and ordered in the previous period.
Example
Percentage of lost customers = Number of lost customers / Number of all customers
Evaluated variables
The number of customers, products, areas are evaluated.
Data source
Issued invoices or sales orders from customers.
Share of new customers
To grow your business, you need to attract new customers. To determine the number of new customers, it is necessary to specify the assessment period and the previous period against which it is verified whether the customer is new or existing. That is, if a customer occurs in the assessment period but not in the previous period, then it is a new customer.
Example
Percentage of new customers = Number of new customers / Number of all customers
Evaluated variables
The number of customers, products, areas are evaluated.
Data source
Issued invoices or sales orders from customers
Receiving orders
This indicator measures the volume of orders received from customers over a given period. It therefore measures the receipt of orders not the invoicing of deliveries of services, products or goods. It shows with what success you are able to close business cases. The indicator can also be broken down for sales representatives.
Evaluated variables
For example, the trend of order intake, the volume of orders received since the beginning of the year, comparison with the previous year or with the business plan can be evaluated. Various measures can be monitored for the indicator, e.g. sales, profit, value added, number of orders, number of products, m2 etc.
Data source
Orders received from customers by date of receipt. In case of comparison with the business plan, the business plan table is another data source.
Fulfillment of the business plan
The basic indicator for business evaluation is the Business Plan Performance, where actual sales (or the forecast of invoice sales) are compared with the business plan or with the previous period. The structure of the business plan depends on the nature of the industry in which you are doing business. You can also choose the period over which the performance of the plan is assessed. The most common period assessed is the year-to-date. The minigraph can show the development of the indicator by month.
Example
Business plan fulfilment in % = Actual sales + sales forecast / Business plan (or past sales)
Evaluated variables
With the indicators you can track different metrics e.g. sales, profit, value added, number of orders, number of products, m2 etc.
Data source
Actual sales, Sales forecast, Business plan
KPI Production
Planned use of machines
This indicator evaluates the planned use of machines as a ratio of the time of planned production orders to the available machine time.
Example
Planned use of machines in % = time from planned orders / available machine time
Evaluated variables
The indicator is expressed as a percentage of the planned use of available machine time. It can be evaluated for the whole company, for a group of similar machines, or for a specific machine. The outlook for a selected period, e.g. weekly, is also evaluated. The planned time can be broken down, for example, according to the status of production orders, e.g. into planned and released orders.
Data source
Available resource time, Scheduled time
Production resource efficiency
This indicator, abbreviated as Overall equipment effectiveness (OEE), assesses the efficiency of the use of production resources, i.e. machines and workers.
Example
Efficiency of production resources in % = Efficiently used resource time / Available resource time
Evaluated variables
The indicator is expressed as a percentage of effective use of available resource time. It can be evaluated for the whole company, a group of similar resources, or for a specific resource. The trend over a selected period, e.g. weekly, is also assessed.
Data source
Available resource time, Scheduled time, Actual time, Discrepancies and interruptions (downtime)
KPI Stocks
ABC Inventory analysis
ABC analysis is based on the Pareto principle. According to this principle, 80% of the consequences stem from 20% of the causes. For example, 80% of the purchase turnover is made up of 20% of the items. ABC analysis uses a more detailed breakdown, classifying individual suppliers or items into three categories according to their importance...
Kategories of ABC analysis
item A – these are the slots with the highest turnover, share of inventory or turnaround time, in terms of inventory optimization they represent the greatest potential for possible reduction of inventory levels
item B – these items represent the average stock level and the average reduction potential
item C – items with low stock in warehouse or with trouble-free turnaround time
Evaluated variables
ABC inventory analysis can evaluate different variables:
- turnover, where items are broken down by share of turnover
- the amount of inventories, where items are broken down according to their share of the value of inventories
- inventory turnover, where items are broken down by turnover days
Data source
Stock levels and movements for the selected period
Stock turnaround time
Stock turnaround time is a measure that indicates the average number of days that stock is "sitting in stock" until it is sold or consumed. An stock turnover time of 50 days means that from the time of acquisition of materials, products or goods – to the time of consumption or sale – the materials, products or goods are in stock for an average of 50 days. The objective of efficient management is to achieve the shortest possible stock turnover time.
Example
Stock turnaround time in days = Stock on hand / (Consumption for the selected period / Length of the evaluation period in days)
Evaluated variables
The indicator can be monitored for each item, group of items, warehouse or company. Both quantitative and financial variables can be evaluated.
Data source
Stock levels and consumption for the selected period. For consumption, it should be clarified whether stock movements are included.