A key business driver is an indicator that has a major impact on the performance of your specific business. The secret to success is identifying essential ones that:
- Are measurable
- Can be compared to a standard (budget, last year’s figures, or an industry average)
- Can be acted upon
Sales may be easy to monitor, but sales may not be the true driver for your business. It could be a number of sales calls made, your follow-up service campaign, or the traffic that hits your website. These are the drivers that help generate sales.
The range of business drivers varies from business to business.
- Sales lead in a service business
- Sales per square foot in a retail store
- Machine downtime (or efficiency) in manufacturing
- First time fix in a maintenance business
Competitors may use different drivers to improve their performance.
Costs, like sales, should be tracked in every business. Focus on the variable costs (material, labor) and what causes them to fluctuate. If you have a service business, concentrate on who is making you money and who isn’t.
Working capital is cash in the bank you need to pay bills. To ensure you have an adequate cushion, calculate how much extra capital is needed to fund each extra 10% increase in sales.
Overdue receivables are a sign all is not well, especially if any of your customers are likely to default. In today’s uncertain business environment, it’s smart to pay attention to which customers are 30, 60, and 90-days overdue. Take prompt action when any lag.
A service business had disappointing sales for months until the owner realized that “hours sold per consultant” was the key driver. Once that was monitored, it became crystal clear which employees were earning their keep.
Finding the correct key drivers can be more art than science but keep at it. When you have correctly identified them, you’ll be able to monitor, adjust, and move confidently into the future.
The road is easier together,