December 06, 2019
Large volumes of data can be confusing for a small business – you may mistakenly assign too much weight to some data or overlook important information. Forbes Finance Council recently detailed which metrics best help small businesses:
  1. Growth and Profit Percentage - Take your operating profit as a percentage of total revenue and add it to the annualized growth rate.  Targets can vary, but a general rule of thumb is that the sum of growth and profit percentage should be greater than 40.
  2. Customer-Acquisition Costs - You need to know how much it costs in dollars to acquire a new customer so you can properly price your products and services.
  3. Cash Flow and Revenue - It’s obvious – every business needs cash inflow to survive, to earn revenue and to grow bigger.
  4. Profit and Loss - Track your P&L (profit and loss statements). While there are many metrics to be gleaned from the P&L, you need to keep track of your business revenue and expenses over a specified period of time. Is your revenue translating into actual income?
  5. The 80/20 of Your Business - Track which product or service produces 80% of your revenue and may just cost you 20% of your time/overhead.
  6. Debt-to-Equity Ratio - You cannot borrow your way into prosperity.
  7. Cash Flow Available for Debt Service - You don’t want to borrow more than you can afford.
  8. Throughput Time - Knowing how long it takes you to move your customer through your process from start to finish is critical to efficiently operating your business.
  9. Gross Profit - This is everything. What’s left to pay the bills? What’s required to meet breakeven? Knowing your GP makes calculating top-line required revenue much easier.
  10. Monthly Spend - How much money is your business spending in a given month?
  11. Conversion Rates - Your marketing efforts won’t mean anything if no customers are converting.
  12. Lifetime Value - Don’t only rely on tracking sales or expenses. Lifetime value will help you spend wisely on the customers who will be available to your business well beyond their latest transaction.
  13. Longevity - How long are you going to be around? You can get insurers and others are thinking about it, so you should be, too.
SOURCE: forbes.com, 10/25/19