As a business owner, it's important to monitor the metrics that matter most to your business. However, with so many areas of your business to measure, it can be overwhelming to determine which metrics to focus on. We often get asked by our clients what metrics they should be monitoring.
Some of the metrics that businesses can measure include turnover, average turnover per customer, gross profit, gross profit percentage, gross profit per customer, net profit, net profit per customer, net profit percentage of turnover, EBITA (Earnings before Interest Tax and Amortisation), and many more.
While it's great to know all of these metrics, it can sometimes be too much information and not provide the insights you need.
To simplify things, there are three things to consider when identifying KPIs:
What do you want to get out of your performance metrics, and why do you want to measure them? For example, if your goal is to grow your business turnover, you should measure it, but not in isolation, as having a great turnover is pointless if you're not profitable.
Who will gather the information, and how easily can they get the right information to you? It's vital to have access to the correct data as easily and simply as possible to avoid confusion or misinterpretation.
Simplicity is key. Metrics should be easy to understand, and overcomplicated and hard-to-understand metrics can result in people either not understanding what they're looking at or not wanting to produce metrics that they don't understand.
By focusing on the metrics that matter most to your business and considering these three factors when identifying KPIs, you can get a clear picture of your business's performance and make informed decisions to drive growth. Here at MA Whately, we can help you identify and track the metrics that matter most to your business to ensure your success.
Here are six simple metrics that every business should know and easily obtain:
Income/Turnover: This is the lifeblood of your business, and it's essential to know your income per month and compare it to previous months and years. Additionally, tracking average income per customer can help you identify opportunities to increase revenue.
Gross Profit: This metric shows how much profit your business makes before administration expenses. By tracking gross profit percentage, you can monitor how your business is performing.
Net Profit: This is the profit after all expenses have been taken into account and is a key driver in determining how a business is performing. Tracking net profit as a percentage of turnover can help you measure progress over time.
Debtors – Money owed to you: It's crucial to measure how quickly people pay you and to monitor debtor days to ensure you're collecting money owed to you in a timely manner.
Bank: Knowing what money is in your bank is vital, and tracking what's due to come in and out every month can help you avoid cash flow issues.
Creditor – Owed by you: It's important to be aware of what suppliers are owed and when they are due to be paid, allowing you to plan your spending and give a full picture of who has to be paid.
Tracking these metrics will provide you with a comprehensive overview of your business.
As you gather more information, you can compare it to previous periods to monitor your progress. Once you establish the metrics you want to measure, they can help drive your business growth. Here at MA Whately, we are here to discuss any of your metrics with you and to look at areas where you may need financial help and advice.
Get in touch with our office if you want to have a quick chat about the services we offer here at MA Whately and how we can help you and your business.
