"Business By the Numbers - Part 6” discussed the importance of tracking your business by using numbers from your Balance Sheet and Profit and Loss statement to determine your Z-Score.
The next and final topic to discuss is Additional KPI Metrics and Useful Websites. Again, we’ll use information about business performance measures from the Vistage* “Formulas for Success” publication.
“Every business has its own KPIs in addition to the traditional key indicators. These company-focused KPIs are a way to measure success of the strategy. For example, if the business has chosen a customer centric strategy, the KPI metrics might include:
- Time to delivery (service or product)
- Redos or errors or return visits
- Number of customer complaints
- Number of times required to complete service
Another example might be a strategy of innovation and new product development. The KPIs might include:
- Sales of new products during first 12 months
- Number of new products delivered to market per year
- Cost of new product development
- New products in top 10 products each year
Once the business performance measures are identified, it is critical to measure the trend over time and against a benchmark. To determine the benchmark, select a goal and measure success against that goal.
KPIs are most useful and effective when reported on one single sheet for the CEO to review regularly. The power of KPIs is their ability to predict trends in the business and success toward goals. When reviewed in a simple one-page format, the CEO has the basis for analysis, insights and mid-course corrections, if needed.”
www.sba.gov The U.S. Small Business Administration-SBA
www.score.org SCORE “Counselors to America’s Small Bus”
www.commerce.gov U.S. Department of Commerce
This concludes my “Business By the Numbers” blog posts. I hope the discussion about business ratios and business performance measures was helpful. If you need additional information or help with your calculations, I suggest that you contact your CPA to provide assistance. Good Luck!