Metrics are essential for any business owner who wants to make informed decisions. These key performance indicators (KPIs) are measurements of business performance that provide valuable insights into a company’s financial health, productivity, and overall success. By tracking and analyzing these metrics, business owners can make data-driven decisions that will drive growth and profitability. In this article, we will discuss some of the most important metrics used to measure weekly and ground and support your decision making.
Thanks to Tricia Taitt, CEO of financial advisory firm FinCore for the genesis of this article
Accounts Receivable Days
One of the most critical metrics for any business owner to track is accounts receivable (AR) days. This metric measures the number of days it takes for your company to collect payment after you have issued an invoice. A high AR days number can indicate that your customers are slow to pay or that you need to improve your invoicing processes. A low AR days number, on the other hand, means that you are collecting payments quickly and efficiently.
By monitoring AR days, business owners can get a better understanding of their cash flow and take proactive steps to manage it. For example, if your AR days are high, you may need to offer incentives for early payment or consider implementing more aggressive collection efforts. Alternatively, if your AR days are low, you may be able to negotiate better payment terms with your vendors or suppliers.
Cost of Goods Sold (COGS)
Another crucial metric for business owners is the cost of goods sold (COGS). This metric measures the direct costs associated with producing and delivering a product or service. These costs include materials, labor, and overhead expenses.
By tracking COGS, business owners can better understand their profit margins and adjust their pricing strategies accordingly. For example, if your COGS are high, you may need to increase your prices to maintain profitability. Alternatively, if your COGS are low, you may be able to offer more competitive prices and gain a larger market share.
Shopping Cart Abandonment Rate
For e-commerce businesses, shopping cart abandonment rate is a critical metric. This metric measures the percentage of online shoppers who add items to their cart but do not complete the checkout process. A high abandonment rate can indicate that your website or checkout process is confusing or that your prices are too high.
By monitoring shopping cart abandonment rate, e-commerce businesses can identify the root causes of abandonment and take steps to reduce it. For example, you may need to simplify your checkout process or offer incentives like free shipping to encourage customers to complete their purchases.
For service-based businesses, tracking billable time is a crucial metric. This metric measures the amount of time that your employees spend on billable projects. By tracking billable time, you can better manage your team’s workload, avoid employee burnout, and ensure that you are billing clients accurately.
For example, if you find that your employees are consistently working more hours than they are billing, you may need to adjust your pricing strategy or consider hiring additional staff. Alternatively, if you find that your employees are consistently working fewer hours than they are billing, you may need to re-evaluate your project management processes and ensure that your team is working efficiently.
Percentage of Progress Completed
For project-based businesses, tracking the percentage of progress completed is an essential metric. This metric measures the amount of work that has been completed on a project relative to the total work required. By tracking progress, you can estimate when cash will come in and ensure that you are on track to meet project deadlines.
For example, if you find that progress is lagging behind, you may need to allocate additional resources or adjust project timelines. Alternatively, if progress is ahead of schedule, you may be able to take on additional projects or allocate resources to other areas of your business.
Customer Acquisition Cost
Finally, for businesses looking to grow their customer base, tracking customer acquisition cost (CAC) is a crucial metric. This metric measures the cost of acquiring a new customer, including advertising, marketing, and sales expenses.
By tracking CAC, businesses can ensure that they are investing in the most effective marketing and sales channels and that they are generating a positive return on investment. For example, if you find that your CAC is high, you may need to re-evaluate your marketing strategy and focus on more cost-effective channels. Alternatively, if your CAC is low, you may be able to increase your marketing budget and accelerate your growth.
In summary, monitoring the right metrics is crucial for any business owner who wants to make informed decisions. These metrics provide valuable insights into a company’s financial health, productivity, and overall success. By tracking and analyzing these metrics on a weekly basis, business owners can take proactive steps to improve their cash flow, profitability, and customer acquisition efforts.
While the metrics discussed in this article are essential, it is important to remember that not all businesses are the same, and there may be other metrics that are more relevant to your specific industry or business model. As a business owner, it is important to identify the key metrics that best ground and support you in decision making and to regularly monitor and analyze them to ensure that you are on track to achieve your goals.
Ramon Ray is unapologetically positive. He’s the publisher of Breakfast with Champions BWCDaily.com and ZoneofGenius.com Ramon’s an expert in personal branding and founded Celebrity CEO™ focused on personal branding. He’s a serial entrepreneur who’s started 5 companies and sold three of them. Get to know him better at RamonRay.com