KPIs. The few numbers that tell whether the business is going where it should.
A KPI (key performance indicator) is a number that measures how close a business is getting to a precise goal, over a precise period. Every KPI is a metric, and only a few metrics deserve to become KPIs.
A KPI has four parts: what it measures, how it is calculated, how often it is read and which value is the target. Without the target it remains a statistic.
What gets measured steers behaviour. Robert Kaplan and David Norton opened their 1992 Harvard Business Review article like this: «What you measure is what you get».
In small Italian enterprises numbers are still read little: business intelligence software is used by 12.2% of enterprises with 10 to 49 employees, against 70.3% of large ones, according to Eurostat for 2025.
This entry is part of the glossary of AI and automation, where every term has a short definition. Here the definition widens: the parts of a KPI, seven examples with the formula, how many to choose, the difference from metrics and SLAs, and how to read them without recalculating them by hand.
What KPIs are
A KPI is an indicator chosen because it measures a goal that matters, and read at a fixed interval. Monthly revenue is a metric. It becomes a KPI when there is a written target next to it, someone who reads it every Monday, and a decision that changes if the number drifts away from where it should be.
A KPI has four parts. The name, that is what it measures. The formula, that is how it is calculated and with which data. The frequency, that is how often it is read. The target value, that is where it has to get to and by when. An indicator missing one of the four produces discussions in meetings instead of decisions.
Where the idea comes from
In January 1992 Robert Kaplan and David Norton opened their Harvard Business Review article on the balanced scorecard with a sentence: «What you measure is what you get». A company's measurement system, they wrote, strongly affects the behaviour of those who run it and those who work in it.
In the same article they observed that traditional financial measures, such as return on investment, can give misleading signals about improvement and innovation. From there came the idea of placing next to the financial figures those of customers and processes, which move before revenue and tell in advance where it is heading.
Seven KPI examples, with the formula
Seven indicators cover the four areas almost every small business has: sales, customers, operations, administration. The formula is the part that matters: two people calculating the same KPI in different ways will get two numbers, and will argue about the number instead of the business.
| KPI | How it is calculated | What it tells you |
|---|---|---|
| Conversion ratesales | Accepted quotes divided by requests received, in the month. |
How many requests become customers. If it drops, the problem lies between the request and the quote. |
| Average order valuesales | Revenue for the period divided by number of orders. |
Whether customers buy more or less with each order. |
| First response timecustomers | Median time between the arrival of a request and the first reply from a person or the system. |
How long whoever writes to you waits. It is the first number a customer perceives. |
| Repeat purchase ratecustomers | Customers who bought again divided by active customers in the same period of the previous year. |
How many customers come back. Its opposite is churn. |
| On-time deliveriesoperations | Orders delivered by the promised date divided by orders delivered. |
Whether the promise made to the customer is kept. |
| Days sales outstandingadministration | Trade receivables divided by revenue for the period, multiplied by the days in the period. |
How much time passes between the invoice and the money in the account. |
| Overdue shareadministration | Overdue unpaid invoices divided by total trade receivables. |
How much of the receivables is already late, and needs a reminder. |
How many KPIs you need, and which to drop
One question decides the right number: for each indicator, which decision changes if the number moves? If the answer is none, the indicator comes off the list. The owner reads the company's KPIs; each person reads those they can act on, and only those.
The opposite risk has a name, vanity metric: a number that grows and is nice to look at, such as website visits or followers, but does not tell whether the business is making money. You recognise it with two questions. If it doubled tomorrow, what would you do differently? And which customer would notice?
How to read them, without recalculating by hand
A KPI is useful if it reaches whoever decides already calculated, always at the same interval. In 2025, according to Eurostat, business intelligence software is used by 16.0% of Italian enterprises with at least 10 employees: 12.2% of small ones and 70.3% of large ones. According to Istat, data analysis concerns 41.9% of SMEs and 83.6% of large enterprises.
The real work lies upstream. The data a KPI is calculated from must arrive by itself: from the management software, from the CRM, from the inbox. An indicator that someone has to recalculate by hand every Monday soon stops being read, and with it the decision it was meant to produce.
KPIs and SLAs
A KPI measures an internal goal; an SLA, service level agreement, is a level of service promised to someone else, often written into a contract. The same number can be both. First response time is a KPI if it is the department's goal, and becomes an SLA when it is promised to the customer, for example a reply within 24 hours.
How Itria uses it
Itria's Cruscotto is a page of KPIs: the numbers that matter for that business, calculated every day from data that already exists and readable in a few minutes. Monthly reporting brings the same numbers on the first of the month, in a letter for the owner and in a file for the accountant.
Before building, we choose together which numbers go in, and set a baseline: today's value, before changing anything. It is the first of the principles written in Ethics, «Analysis before the solution»: without the starting value, no improvement can be proven.
Related terms
Vanity metric
The number that grows and reassures without changing any decision. The opposite of a KPI.
First response time
The time between the arrival of a request and the first reply. It is the KPI a customer perceives first.
CRM
The software for customer relationships. Sales KPIs come out of it, if the data flows in by itself.
SLA
The promised level of service, often by contract. It is measured with the same numbers as a KPI.
Questions and answers
What are KPIs in simple terms?
KPIs, key performance indicators, are the few numbers that tell whether a business is getting closer to its goals. Every KPI has four parts: what it measures, how it is calculated, how often it is read and which value is the target.
Monthly revenue becomes a KPI when there is a written target next to it and someone who reads it at a fixed interval.
What is the difference between a KPI and a metric?
A metric is any measurable number: website visits, calls, orders. A KPI is a metric chosen because it measures a goal that matters, with a target value and a decision that changes if the number drifts away.
All KPIs are metrics, few metrics deserve to become KPIs. A number that always grows and changes no decision is a vanity metric.
What are examples of sales KPIs?
The request conversion rate, that is accepted quotes divided by requests received in the month. The average order value, that is revenue divided by number of orders.
The first response time, that is the median time between the arrival of a request and the first reply. The repeat purchase rate, that is customers who bought again divided by active customers of the previous year.
How many KPIs should a small business have?
Few, and one question decides the right number: for each indicator, which decision changes if the number moves? If none, the indicator goes. An owner reads the company's KPIs, each person those they can act on.
A long list produces discussions instead of decisions, and an indicator recalculated by hand every week soon stops being read.
What is the difference between a KPI and an SLA?
A KPI measures an internal goal of the business. An SLA, service level agreement, is a level of service promised to someone else, often written into a contract.
The same number can be both: first response time is a KPI if it is the department's goal, and becomes an SLA when it is promised to the customer, for example a reply within 24 hours.
Notes on sources
- The sentence and the two observations come from Robert S. Kaplan and David P. Norton, The Balanced Scorecard: Measures that Drive Performance, Harvard Business Review, January-February 1992, in the part of the article published openly, read on 26 September 2026.
- The shares of enterprises using business intelligence software come from the 2025 Eurostat survey on ICT usage in enterprises, dataset isoc_eb_iip, and from the page E-business integration. They cover enterprises with 10 or more employees.
- The shares on data analysis come from Istat, Imprese e ICT, 2025: analysis carried out with internal staff or external organisations, enterprises with at least 10 employees.
- The seven formulas are the standard definitions of these indicators, written for a small business. Whoever adopts them sets down in writing the period and the source data, so that the number can be recalculated the same way.
You already have the numbers. The point is to have them arrive, every morning, already read.
The first step with Itria is a fifteen-minute video call: we look at which numbers decide your month and where they can be taken from without recalculating them by hand. Write us a line about what weighs on you. We take the first step: what a customer sees when they look for you, and what we found there. Even if we don't end up working together.