TRAVERSE CITY — Running a successful business requires keeping your eye on many things. However, you know instinctively that some are more important than others.
A critical step in improving your performance or profitability is to identify the key metrics that matter most for your business. They must be quantifiable. What can be measured can be improved. Start by picking three or four key drivers essential to your success. Common measurements that are important to track monthly for most businesses include: gross sales, profits, accounts receivable, and month-end cash. If you have employees, monitoring monthly payroll and employee benefits costs are also important.
Some metrics are specific to industry type. For example, it’s helpful for restaurant owners to track average check, sales per employee, and spoilage or “shrink” rates. For manufacturers, it’s a good idea to track inventory turns, dollars, and age. You may want to measure productivity by tracking units per machine, shift, week, or man hour. Review available industry data as a benchmark to see where you may need to improve.
If the average for similar companies is 12 inventory turns and you’re only turning yours eight times, you need to develop an action plan and use the charts to measure your progress and maintain focus on the problem.
The list of potential measurements may seem endless. Simplify by developing your own “dash board” with the key metrics that are most important to your business. You can use small business accounting software like Quick Books or other online small business tools to track many of these. You can also simply create your own spreadsheets with the key metrics you want to monitor regularly. Once you input the historical data, you’re able to track results and performance against goals on a regular basis. With ongoing monitoring, you’ll identify trends more quickly.