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Mobilizing Metrics: The Craft of KPI Development

Key performance indicators help specialty food leaders track the progress of their businesses. Finding the right metrics to determine business health is paramount.

During SFA’s In the Know webinar, “Key Performance Indicators: Developing Measures That Drive Results,” Liz Myslik of growth investor Loft Growth Partners and Dave Hirschkop, previous owner of Dave’s Gourmet, discussed the types of data that matter most to specialty food businesses at different stages, where to get the data, and how it can be leveraged for business success.

“Whatever question you have about your business, the answer can be found in a number,” shared Myslik, grounding the conversation of KPIs around the objective data that can both track the growth of your business and contextualize your progress, determining how you compare to your competitors or the category in general.

Data and KPIs are inextricably linked, and Myslik shared that business data, particularly for emerging consumer food and beverage brands, can be broken down into two categories: growth metrics and financial metrics.

How well a specialty food company grows its business is very important. Two key metrics in this category are distribution and velocity. Distribution considers how many places your product is being sold and is measured by “doors” or “total points of distribution,” whereas velocity measures how much your product is selling through at each location and is measured in either dollars or units per SKU, per store, per week.

Velocity is also a key metric at every stage of business, and both Myslik and Hirschkop agreed that it is the biggest driver of long-term sustainability and success. Potential private equity and strategic investors will often look at this information when determining whether to financially support a business. A grocery buyer is often the perfect resource to provide this information and contextualize it, as they will also have knowledge about how velocity can relate to the category or a company’s particular stage of business.

Financial metrics are crucial to learning about a business’s overall health. Myslik shared that the single most important metric in this category for businesses at any stage is operating cash flow: “If you don’t have cash, you don’t have a business." Although a business can look profitable on paper, she added, it could still lack cash in the bank at the end of the day.

The panelists shared that resources like SPINS and Nielsen can provide useful data that businesses can use to craft strong KPIs; however, they tend to be expensive. 

“There are often cheaper ways to get this information,” said Hirschkop. He suggested reaching out to distributors and brokers who can both help provide a more holistic view. “There is usually a guerilla way of getting [difficult-to-find or expensive data], you just need to be willing to ask for help.”

Businesses can also leverage consumer data to improve one or many business aspects. Myslik shared that ecommerce provides an excellent resource to learn about the consumer, including demographic data, and metrics like repeat purchase intent. For example, if only a few people are buying a product a second time, there may be an issue with the product or a problem with pricing.

To learn more about how a specialty business can make the best use of data, you can watch the webinar on demand in the SFA Learning Center. Watch now.

Related: Developing KPIs: Q&A With Industry Experts; Consumer Insights and The Future of Food at IFT First