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Keeping track of key metrics

Monitoring your key performance indicators, numbers and metrics are an important part of running a successful business. It’s not all about measuring profit and loss either.

You don’t need to get caught up in the figures, but knowing which metrics to follow, and why, will help you spot problems and keep track of how you’re growing.

There isn’t a “one size fits all” approach to tracking some of these metrics and key performance indicators (also called KPIs, which are targets used to measure the success of an organisation or employee).

Which you use, and how you track them will depend on your industry and business model. A business advisor will be able to help you work this out.

How much money your business has made.

Expenses aren’t included in this figure — just your income. Your revenue is all the money you make from your products or services, as well as any other income you earn, eg interest on savings and income from investments.

Revenue is one of the most important numbers you’ll keep track of to make sure you’re covering your costs and remaining viable. It is different from cash flow.

Tips on business finance basics

Your revenue minus your expenses, or the bottom line.

While profit is almost always a good thing, loss isn’t always bad. It’s about context — it’s common to operate at a loss if you’re just starting out or if you’ve made an investment with a plan for it to pay off later. But you’ll need to make some changes if your business is continuously losing more money than it’s making.

Advice on operating at a loss

Net profit margin

Your net profit as a percentage of your revenue, year to date.

This figure will tell you how successful you’ve been at making a profit vs covering costs.

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How much it costs to run your business each month.

This is the amount of money you spend on keeping your doors open. It includes everything from staff salaries and rent, to the money spent on topping up coffee supplies in the staffroom.

Tracking this figure will help you stay within your budget.

Think carefully about what level of utilisation you actually expect and want for different people and assets.

Think carefully about what level of utilisation you actually expect and want for different people and assets.

Employees who spend more time on non-billable tasks, eg sales and admin, won't have a high rate. Those who do charge clients for their hours might feel an undue pressure if you set unrealistic expectations for them.

The level to which your people and big assets, eg machinery, are in use.

There are a couple of ways to calculate this metric. A common way to measure the utilisation rate of your employees is as the percentage of billable hours each person clocks compared to the total number of hours they work.

For your assets, it’s the percentage of how much each asset is in use compared to its full capacity — or the percentage of how much revenue each asset actually earns vs its maximum earning potential.

Keeping track of your utilisation rates will help your business work towards its potential. But it’s important to understand that no person or asset can be expected to give you a 100% return.

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Case study

Utilisation rate

Nicola owns a small marketing firm. Justin, one of her full-time employees, works 40 hours a week but only spends 30 hours on work Nicola can charge her clients for. This means Justin’s utilisation rate is 75%.

For your assets, it’s the percentage of how much each asset is in use compared to its full capacity — or the percentage of how much revenue each asset actually earns vs its maximum earning potential.

Keeping track of your utilisation rates will help your business work towards its potential. But it’s important to understand that no person or asset can be expected to give you a 100% return.

Employee engagement

The level to which your people are engaged with their job and the business.

Engaged and enthusiastic employees are more productive, while unhappy staff often have a negative impact on the bottom line. It can be difficult to get a specific measurement of engagement, but it’s important to check in with your people on how satisfied they are with their job and the business.

HR advisors can help you if you aren’t sure how to best gauge engagement.

Net promoter score

How likely your customers are to recommend you.

A net promoter score is a simple way to calculate customer loyalty based on responses to a single question: “On a scale from 0-10, how likely is it that you would recommend our company/product/service to a friend or colleague?” Customers who rate you 9 or 10 are the ones who are likely to enthusiastically refer your services to others.

Word-of-mouth marketing is one of the most important ways to grow your business. Your net promoter score will tell you how valued your business is, how recommendable you are, and who your most valuable current customers are.

Current customers

The number and value of your customers.

It’s a good idea to keep track of how many customers you have, and how often and how much money they spend. The more you know about your customers, the more you will be able to maintain good relationships, create great customer experiences and drive your marketing.

Keep in mind that as your business grows, the kinds of information you keep on your customers will most likely change and grow too.

 

The size of your business relative to the rest of your industry.

Knowing your market share will give you a good idea of where you stand now — and how you might grow within your industry. To calculate your market share, divide your sales or revenue by the total sales or revenue made by you and your competitors.

Tips to research your market and competitors

Seeking advice on key numbers and metrics

Seeking advice on key numbers and metrics

Keeping a constant pulse on your key numbers and metrics can be a lot of work. It can also be difficult to determine which areas you should be focusing on and how to do it in a way that suits your particular business.

Talking to a business advisor will help you understand how to do this.

Types of advice you’ll need

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