“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.”
The U.S. Small Business Administration-SBA
Official business link to the U.S. Government
SCORE “Counselors to America’s Small Bus”
U.S. Department of Commerce
4,000 Sources of Financing
RMA is a member-driven professional association whose sole purpose is to advance the use of sound risk principles in the financial services industry.
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!
From the beginning, our coaching Chairs have been at the heart of what makes the Vistage experience so powerful for so many members. Vistage Chairs are a distinguished group of business leaders who come to us from a wide range of industries. Some have owned businesses, many have been CEOs of domestic and international companies, and all are united by a desire to share their insight and expertise to educate other business leaders in their communities through executive business coaching.
About the Author
My name is Jim and people usually call me Jim. Sometimes I’m called James, usually at a doctor’s office. My favorite season is Summer because I like warm, sunny weather. I also like the colors of Autumn. My favorite hobby now is reading, but in the past I spent a great deal of time with my coin collection and drawing and painting pictures. My favorite sport is baseball and the Yankees are my team. I coached baseball and softball for nearly twenty years with my three children. My favorite activity is going out to dinner, throw in a little rock music from the 60’s and early 70’s and it’s a good night. My favorite quotes: “If you think you can do a thing or think you can't do a thing, you're right.” - Henry Ford. “I have not failed. I've just found 10,000 ways that won't work.” - Thomas A. Edison. “Opportunity is missed by most people because it is dressed in overalls and looks like work.” - Thomas A. Edison.More Content by Jim D'Amico