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,
Linda