Metrics that matter

Now you know you need to measure your business’s metrics, the next question is: which metrics should you measure? 

The answer to that depends on your overall vision for your company. What is it that you want to achieve? Which targets have you identified as being the ones that, once reached, will make a positive difference to your business?

Is your goal to grow your customer base? Provide better service? Offer a flawless product? Eliminate waste? Improve your bottom line?

All of these outcomes can be measured using the appropriate metrics, but the key here is choosing the right metrics. Measuring the wrong metric can skew your results, and even shift your focus away from what really matters.

Here are some common targets and the metrics used to measure them, take into consideration this is a small insight to the metrics you could measure – it all comes back to your goals:

• Profitability and growth: Total sales and revenue of your individual products and/or services

• Gross and net profit margins: Fixed and variable costs (for most businesses, wages and cost of sales are the major controllable expenditures – the remainder tend to be fixed)

• Quality: Minimising refunds/rejects 

• Employee retention: Monitoring employee resignations and measuring length of service

• Wastage: Goods disposed of with no cost recovery. For many grocery and hospitality outlets, this equates to the food left over at the end of trade which is often donated to charity. While that’s a great community service, take care not to over-order perishable items. 

• Accounts receivable and days to recover: The value of your AR and the length of time it takes to receive payment. 

• Sales performance: The conversion of a prospect to a client/sale

  
  

And as a side note, measuring your sales performance can be a challenge as not all revenue is equal – some income streams are more profitable than others. Additionally, marketing spend and price cuts can result in misleading sales revenue metrics – and if you’re intent on breaking into new territory, the effort you expend now will likely be for long term as opposed to immediate profit – something to take into account when you’re measuring performance.

For small businesses, tracking the prospect-to-customer conversion rate is valuable, although this should never distract you from giving your existing clients great service.

For team members, you might consider these metrics: 

• Customer inquiries answered

• Task completion time

• Task accuracy rate

And of course, the metrics that should always be at the front of your mind are wage costs and the cost of providing your goods or services.

But here’s the thing, 80% of your efforts will be a waste of time – but that’s another topic!