You Improve What You Measure
The most successful companies constantly evaluate every aspect of their business. They measure profitability by customer so they can shed the least profitable customers. They measure repeat buying patterns so they can see what products and services are the most popular. They measure customer lifetime value so they know how much to spend to acquire a new customer.
These metrics provide them with a clear sense of where everything stands. More importantly, it gives them the opportunity to improve each number. What you can measure, you can improve.
Every business has their own set of unique performance metrics. Here is a starter list of some of the most common key metrics you should monitor regularly:
- Profitability by customer – top line revenue growth only makes sense if you are making a profit, otherwise you are losing money
- Rate of repeat business – repeat business is usually the least expensive to get and the most profitable
- Inventory turnover – if you sell products, moving them off the shelves faster improves your cash flow
- Time to close a sale – predict revenue based on the deals in your pipeline
- Who is reading your email newsletter – these are your most promising sources of new and repeat business
There are many other key performance indicators that will be specific to your line of business. Once you identify what you should be measuring, you will automatically start to see ways you can improve your performance. That leads to growth and higher profits.
For a deeper look, read Vince Kellen‘s detailed paper on Business Performance Measurement from DePaul University.