The beauty of metrics

A profit and loss statement (P&L) is a measure of how your business has performed over a specific time period, and as such, it gives you an indication of how well your business strategies are working.  

If you want to improve your P&L (and who doesn’t!) you’ll need to carry out an in-depth evaluation of your strategies. How can that be done? By using a series of quantifiable metrics (which essentially fall into financial, operational, product and customer related categories) to assess performance and track your progress.  

And that’s why the Sherpa Bookkeeping team is not just interested in your profit margin. We know how important it is to drill down and apply metrics to show us whether your strategies are working for you, or whether a change of approach could make all the difference to your bottom line.   

For example, sales are the result of your marketing and prospect follow-through strategies, so you need to know:  

• That your marketing plan is properly structured rather than ad hoc 

• How many prospects your marketing generated in a specified time frame 

• How many of those prospects you contacted 

• How many follow up meetings were needed to convert to a client/sale 

• How many prospects became a client/sale 

• Your conversion rate – calculated by dividing the total number of conversions by the total number new prospects (within a specified time period) 

• How much your average sale is worth 

• Whether you could upsell your product/service. Remember, fast food chains make huge profits from one simple question: ‘Would you like fries with that?’ 

• Whether potential sales will justify wage costs when rostering your staff 

• How you’re performing in relation to industry benchmarks 

• Your COS – the actual cost of each sale you make. 

At Sherpa Bookkeeping, we work with you to decide which metrics are appropriate for your business, how best to measure them, and the targets you should be working towards. Only when you put these mechanisms into play will your profit and loss become more predictable, and stop being something you fear!