Many business owners know the profit their businesses make but is that all they need to know to grow?
Knowing if your business is making a profit is only a part of the picture. If you don’t know how that profit is generated, how will you be able to replicate the success or avert failure?
Business owners who really want to understand where their business is heading, and so the results of all their hard work, will make sure they have information which show them key trends for their enterprise at their fingertips.
They will know which of their customers, and which of their products or services, are the most profitable for them. They will use this information to target their sales, customer service and marketing efforts towards attracting more of these ideal customers; those who value the goods and services you offer and are willing to pay a fair price.
With published articles and books offering a range of advice on “what business owners should know”, which ones are important for your business? Gross profits are a significant part of the profit equation but not the whole picture. What a business spends out in the way of overheads is also really important to understand and bring under control.
For every business there will be key drivers which effect whether it is successful or not. If you know what these drivers are and can find a way to measure against these drivers, you can direct your efforts in the most powerful way.
Key performance indicators (KPIs) are the measures business owners use to focus their attentions to the drivers of their business.
Some KPIs are generally useful in most businesses. For example measuring leads, quotes and/or order intake can help evaluate the pipeline of work the company may have to generate future sales.
Other KPIs may be specific to a particular type of industry. A retail business’s results will be driven by customer numbers and average spend per customer and so should have KPIs to measure these.
Also if you are able to get hold of industry specific KPI information you will be able to grade the success of your business against your competition.
Looking beyond the simple profit figures will help you get a more dynamic picture of how your business is doing.
If you would like to arrange a meeting to discuss your business key drivers in order to develop tailored KPIs. Don’t be shy – reach out to me for a call or send your questions to email@example.com.