The Business of Numbers

Posted in 2008 under financial, RSS feed for comments
1 Comments

Dec01

What reports do you look at? What numbers are important about your business? Do you review consistently?

If you’re not thinking about these questions, then how are you making decisions? If you don’t keep the important numbers front and center, then you’re probably spending time on activities that are low value add (i.e., aren’t moving the needle).

Important Numbers (KPI: Key Performance Indicators)

Financials

Depending on your business, you might have different numbers that are important. Do some research for your industry and find out what they are. Typically, you always start with the most common: receivables, gross income, net income, etc. From there, depending on your business, you can build ratio’s, percentages and averages around them.

Examples:

Average Revenue Per User/Customer
% of Receivables over 30 days
Avg Net Income per Project/Product
% of Wages/Income
Marketing Cost/# New Customers per Month

The key is having high-level numbers (10 max), that you will use to take action and make decisions.

But Wait, Something’s Wrong…

It’s common, upon trying to pull these reports, to realize that you might not have the numbers; meaning you might not have been inputting the numbers properly to be able to pull these reports. Tisk, tisk. Fix that. Garbage in, garbage out. Typically, it’s your expenses. Ensure your chart of accounts is thorough and transactions are being properly allocated.

Projections & Forecasts

Once you get you KPIs defined and create visibility into your effectiveness, you’ll likely start thinking about budgets and forecast. That’s perfect; however, these depend on your business, growth and targets. Either way, with the new KPIs, you’ll be able to build them out and set strategy that will increase the probability of achieving them!

“you can’t manage what you don’t measure”

- Dr. Deming

What do you manage measure?

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One Response for "The Business of Numbers"

Darren Cunningham December 1st, 2008 at 6:25 pm
Good post Dan. I like this line in particular: “If you don’t keep the important numbers front and center, then you’re probably spending time on activities that are low value add (i.e., aren’t moving the needle).”

Having metrics that you run the business by has never been more critical, but the key is to have the right metrics. This is where Business Intelligence vendors need to focus. It’s no longer enough to provide tools that can provide answers. Organizations need to know what questions to ask and what metrics to measure, monitor and easily benchmark and compare over time. Here’s a presentation I delivered recently to a Salesforce.com user group called Do You have the Metrics that Matter?

http://www.lucidera.com/blog/index.php/2008/11/13/sales-metrics-matter/

Sales managers often “don’t know what they don’t know” about the health of their pipeline and they risk facing unwanted sales surprises at the end of each quarter. Here are some of the questions and associated metrics sales managers need to be able to answer:
- What are your top and bottom performing vertical markets by account?
- How is your sales pipeline split by new vs. repeat customers?
- What’s the likelihood to close based on new vs. repeat win-rate?
- How do your sales reps and regions compare on key metrics such as average deal size?
- Do you have deals in later stages but not forecasted and deals in earlier stages expected to close soon? What % of pipeline are these?
- Which sales reps are most effective competing against your top competitors?
- Which deals are likely stuck in your pipeline? Which lead sources are generating the most pipeline and what is the quality of that pipeline?