By Lisa Blankman, CPA
Manager, Audit & Assurance Services
[email protected]
Many business owners find that their financial statements do not always allow them the ability to truly understand their business operations. They read all the numbers, but how does that help them manage their business day-to-day and equip them to know what adjustments to make? In addition, many times they focus too much on the “now” and not enough on the future and their respective position in the marketplace.
Key Performance Indicators (KPIs) can be helpful in measuring your company’s revenue growth, customer engagement and future potential. The KPIs should include financials ratios of liquidity, operating efficiencies, leverage, etc., as well as specific ratios unique to your business industry or profession. For example, if you’re in the retail industry, you’d want to look at sales per square foot of floor space.
In order to keep growing, you must look beyond your company’s progress and compare it to industry benchmarks. In other words, are you keeping up with your competition in the marketplace? Dig deep for the information that is key to you and your managers.
More and more businesses are reaching out to us for assistance with the process of benchmarking those KPIs, and we have a number of data resources to help!
Here are some data points to measure and compare to industry standards:
- Average revenue per customer
- Hourly labor rate for particular part or service module
- Gross profit by service line
- Net profit margin by customer
- Employee turnover rate
- Salaries of Business Controller, CFO, COO, CEO, etc.
- Monthly website traffic
- Percentage Revenue Growth
- Current ratio
- Inventory Turnover
- Pre-Tax Income as percentage of sales
These are just a few KPIs for you to consider as you examine how well your business is competing with the marketplace. In addition to measuring your company’s place among competitors, these metrics will help you gauge customer engagement, identify underutilized space and tap into new revenue streams. Perhaps you need to lease vacant office space or boost sales by adding new staff members and/or products and services. If your employee turnover rate is high, you may want to consider enhancing your company’s culture and improving employment satisfaction.
We recommend looking at KPIs on a regular periodic basis (monthly, quarterly, annually) over a 10-year period of time to understand fluctuations created by economic cycles. Your focus should be on the long term but with a bias for action that you must take TODAY!
Make sure you are closely monitoring the metrics that will have the most impact in gauging your business’s performance and your position in the marketplace.
If we can assist you further with achieving success in your business or personal affairs, please call Lisa Blankman at (317) 613-7856 or email [email protected].