Crash Course: Key Driver Analysis | SoGoSurvey
How to choose key drivers
Learn how to select key drivers for your company by following these steps:
1. Use a checklist
Effective key drivers meet four criteria. They:
When selecting key drivers, determine whether your variable falls under all four headings. A factor is more likely to meet all the requirements if it is more specific.
2. Look for profitable areas
Factors that have a direct impact on costs, cash flows, and sales figures could be significant key drivers. Four items that influence profit include:
Look at the line items on your financial statements to determine which areas might be key drivers to identify these items and your overall profit.
3. Ask questions
Consider exploring the factors that affect the various aspects of your business when identifying key drivers. Ask a question like “What influences this factor?” for each potential driver. If you provide a response that satisfies the four key driver criteria, you may rephrase the question and use the new factor as the response. Continue doing this until you find a solution based on your decision or uncontrollable circumstances.
For instance, if you were to ask “what influences my revenue” in a retail business, your response might be “product volume.” When you ask, “What affects my product volume?” the number of salespeople may be the response. The number of stores can influence the number of salespeople. However, choosing how many stores your business operates may be a matter of preference. Therefore, a more focused key driver might be “number of locations” rather than “revenue.”
4. Consider benchmarks
Utilize industry-wide data to assist you in selecting key drivers. You could use data on your company’s past success or current fulfillment. You can also make use of information about the business strategies of direct rivals and similar companies. Consider accessing and comparing this data by using an industry data pool or by asking your accountant for assistance.
5. Track all the data
Once you’ve identified your key drivers, keep gathering and documenting information regarding each one’s performance. As the business expands, this may assist you in choosing or changing your key drivers, enhancing future success, and making strategic decisions.
What is a key driver?
A key driver, also referred to as a business driver, is a variable that can impact a company’s performance or success. Key drivers can vary by organization. Even your direct competitors may increase their performance using various key drivers. Most businesses choose their key drivers based on their own history or data that is widely used in the industry. These factors can include:
Examples of key drivers in business
Following are some key driver examples that may have an impact on your company:
Costs
The expenses you incur to run your business could be a major factor. Costs may include things like buying supplies for production, paying employees, renting office space, or any other expenses that prevent you from earning income. Costs fit into the following key driver criteria:
Your profits and, consequently, how well you perform in a particular market or industry can be directly impacted by the number of costs you incur on a monthly, quarterly, and annual basis. Lower costs may allow you to be more competitive.
Costs are financial data that can be monitored on a weekly or even daily basis. They are easily quantifiable and offer concrete statistics about the efficiency of your company.
You can contrast the current costs of your business with those from the past and with those of your competitors. Additionally, you can contrast the prices charged by various vendors with your own. This kind of information, average employee salaries, and local rental rates might all be accessible online.
Most of the time, you can adjust your costs after learning more information You might discover that the cost of renting an office space is dropping in your neighborhood, so you bargain with the landlord for a change. Additionally, you might discover that a different supplier charges $2 less per unit than your current supplier, in which case you might decide to switch or bargain with your current partner.
Customer satisfaction
Although it is a less tangible key driver, customer satisfaction may still be crucial for your company. It fits into the following key driver criteria:
Customer satisfaction has a direct correlation on company performance. If your customers become loyal to your brand, they might come back for additional services and possibly even be willing to pay a little more for some goods.
Through methods such as feedback forms, surveys, questionnaires, and online reviews, you can gauge customer satisfaction. More favorable reviews could indicate that clients are content with the products and services your business offers.
By perusing social media comments, online ratings and reviews, and competitor feedback, you can compare your customers’ feedback to that of your competitors. In these types of forums, customers occasionally make their own comparisons between two businesses or products.
Based on the data you receive, you can try to increase customer satisfaction. To better meet customer needs, you might decide to sell different goods, alter your business hours, hire new staff, or offer better services.
Inquiry levels
In companies that offer estimates or quotes, the volume of inquiries may be an appropriate key driver. Inquiries fit into the following key driver criteria:
The volume of requests for information or quotes may indicate a potential increase in sales. You may have a larger pool of potential clients as more people become aware of your business or its services.
Use a spreadsheet or tally system to keep track of how many requests for quotes you receive. You could keep track from month to month to forecast potential changes in sales.
If you’ve been keeping track of this information for a while, you can compare your results month to month. Some of your rivals might also disclose information on the number of inquiries they’ve received or quotes they’ve given to prospective clients.
You can implement marketing strategies to change this behavior if you notice a dip in customer engagement during particular months or seasons. You may attend vendor fairs or do community outreach. You might also think about investing in more ad space with regional media outlets.
Number of locations
The number of locations you have may be a major factor for larger businesses. The decision of where and how many locations to offer, particularly in retail or service-based markets, may directly affect the profit margin. Locations fit into the following key driver criteria:
Depending on the particular business and the market, more locations might result in more customers. It might be a wise business move to add a new location in a place where there is a pressing need and little rivalry.
You can gauge the size of your network of locations, their separation from one another, and the number and distance of rival locations. You might use this information to decide where and when to open a new storefront.
Making a quick internet search could make comparing your locations to those of your rivals very simple. On their websites or social media pages, many businesses list their addresses.
If you learn that a competitor’s store is closing or that there is available rental space in a new market, you might decide to add a new location. You could also decide to shut down a location in a competitive area and direct those resources elsewhere.
FAQ
How do I know my key driver?
- Number of locations.
- Traffic volume to your business website.
- Effectiveness of the sales team.
- Number and price of offerings.
- Efficiency rates and average downtime.
- Customer satisfaction.
- Staff turnover.
What is a key driver in a project?
- Enquiry levels. The quantity of inquiries (or leads generated, or quotes given) gives you advance notice of any sales peaks or valleys.
- Your costs. …
- Your working capital. …
- Collecting debts. …
- Your inventory levels. …
- Hours sold per day. …
- Staff turnover.
What are the 5 key drivers?
Which is that there will always be a top circle among the three. And this is referred to as the main motivator for your project. For example, with the Olympics, the key driver is time. They must start on the agreed date, whatever the cost. With a nuclear power station, the key driver is quality.
