It’s common and expected for accountants to have no shortage of metrics and KPIs to track. However, as a business owner or leader the biggest issue can be understanding what are the important metrics – that means value vs vanity.
A vanity metric can be defined as anything that is measurable but does not correlate with actual growth. In addition, there are number of metrics that are often missed, less traditional, that can really impact on future growth and reputation.
So what are the metrics that demonstrate true growth and more importantly provide more insight than what would be considered the basic numbers?
The conventional basics
1.Cash Flow metrics: knowing your cash flow gives you an overview of the state of your business. Cash is king.
2. Net Income: like your cash flow, your net profit is a good indicator of whether you’re making or losing money.
- Profit and Loss: a snapshot of your company’s income
- Revenue: knowing your revenue numbers and keeping a close eye on sales is very important, it’s the life blood of the business.
- Gross Profit: the figure that reflects how much money remains after taking away the cost of your product from the selling price.
There are some less conventional metrics that support running a successful business. Understanding and identifying these will involve understanding your entire customer journey from cradle to grave as well as having an engaged workforce.
Understanding these means you can then address the associated behaviours and metric conversions that result in a positive or negative outcome and importantly indicate true growth
Here are some additional key metrics that fall outside of the traditional kpis that will support your growth strategy
The unconventional mandatories
- Customer acquisition costs and lifetime value: are your customers profitable? Is the cost to acquire is greater than the lifetime value
- Customer advocacy: do you track your net promoter score (NPS) through customer satisfaction surveys.
- Churn: how many customers do you lose? How many renew? How many repeat purchase?
- Employeeengagement: Your internal operational health. Your people are your most important and expensive asset, measuring thiscan be a critical indicator of customer growth, retention, and attrition.
- Supply chain: a business can’t keep its doors open for long if it does not pay its suppliers . Accounts payable turnover is a measure of the rate at which your business pay for goods and services in a given period.
About the author: Mike Bulcock, Managing Director of MBL
Mike is the Managing Director of MBL. His business has shaken up the concept of the professional services and the accountancy sector, focusing on the importance of relationships, acting as an extension of his clients’ management team, advising on scalability and agility, and helping businesses work towards their success targets.