What You Measure Matters

Linda LaitalaBusiness, Management, SalesLeave a Comment

A machine shop owner was working hard to add large companies to her customer list.  She courted several and finally landed a gem.  Or so she thought.  A year into the relationship, the new customer was 40% of her workload; she was ecstatic.   Then one of the members of her roundtable asked, how profitable the new customer was compared to existing ones.  That news wasn’t so good; 40% of sales were generating only 2% profit.
Profitability by customer was a new concept for this member.  Suddenly she was interested in knowing what other businesses measured.  Here’s what they shared.

Progress:  While this is useful for tracking performance to goals and actions (% complete is an example), it doesn’t always paint a clear picture.

Broad numbers:  These are good for measuring raw data (# of new customers, sales per customer, total sales, % discrepancies).  But broad numbers don’t provide the detail you need to make knowledgeable decisions.

Change:  Tracks and can drive change in an organization (% increase/decrease in sales, % increase/decrease in profitability).  You can make this number even more meaningful by adding depth (% increase in sales by XXX – profit center, product, customer, etc.)
In determining how well your company is doing, think about the types of measurements you use.  Here is a list of KPIs (Key performance Indicators) that are commonly used.

  • Net profit
  • Net promoter score
  • Customer complaints
  • Waste recycling rate
  • Employee satisfaction
  • EBITDA (Earnings before interest, tax, depreciation and amortization)
  • Staff churn
  • ROI (Return on investment)

You can also check out a website called KPI Library to find other measurements.  Once you have defined your business goals, consider putting together a dashboard to keep your business on track.
Good luck.

The road is easier together,

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