When a doctor first examines a patient, they’ll typically check their vital signs.
This includes the pulse or heart rate, body temperature, respiration rate, and blood pressure. Taken together, these help indicate the state of the patient’s essential body functions.
If any – or all – offer some cause for concern, the doctor can start diagnosing the patient more thoroughly, before suggesting a course of action…
And now we’ve arrived at the part where you’re wondering why we’re discussing basic medical practice.
Well, this idea of ‘vital signs’ is something that can be comfortably extended to your business.
Your company’s financial health should be examined regularly to make sure there are no underlying maladies that will only grow worse if left untreated.
Knowing What to Look For
These financial ‘vital signs’ have many names, some of which may be familiar to you. They include: Key Performance Indicators (KPIs); business metrics; critical success factors; and moneymaking statistics.
No matter the label attached, they are all essentially the same thing: a means of tracking the performance and success of your business.
Just as a soaring temperature or irregular heartbeat will make a physician want to dig deeper in diagnosing their patient, there are a few things you should keep an eye out for when it comes to the health of your business.
For instance, revenue is a clear indicator as to the financial performance of your company. By monitoring your income in comparison to your expenses, you will have an understanding of how much you are making (or not, for that matter), and why.
And when it comes to revenue, consider the various streams. In particular, online sales are simple to measure by implementing sales software, allowing you to spot trends and take action before it’s too late.
Or perhaps you could track the referrals that bring you new business. This will help you determine whether or not your marketing endeavours have been worthwhile, and if your current clients are actively recommending you to their network.
Once you have those customers, think about retention. How many clients are returning to your business over time after first working together or selling them on a discount or offer? Are you maintaining a loyal customer-base, or are you struggling to retain them? The answer will give you an insight into your company’s customer service capabilities.
Take the Pulse of Your Business
These are just some of the Key Performance Indicators – or vital signs – that you ought to look out for as you measure the performance and success of your business.
Understanding how your business is doing at any given moment is crucial to helping you make informed and effective decisions as its leader.
Tracking financial and non-financial metrics can help keep your business healthy. And as with your body, spotting any worrying trends early will make it a great deal easier to remedy than if you leave them untreated.
And it can be tough when you dig deep and track these metrics, only to discover that your business is living on borrowed time. When that happens, you must be ready to evaluate the alternatives; and quite often those alternatives can mean making difficult decisions, such as letting people go, selling the business, or filing for bankruptcy.
Start Tracking Today
Putting a plan in place to track key business metrics is fundamental to the growth and success of your company.
By staying on top of your KPIs, you will be in a much better position as you work with an up-to-date and accurate budget. And by doing so, you will be able to grow and invest in new resources, personnel, or locations, without putting your business under financial strain.
If you’d like to discuss setting up a system to track your key business metrics, please contact us.