Why Your Numbers Are at the Heart of Your Business
29th August 2020
Whatever your business, knowing how it's doing at any point in time means you're able to make the most of opportunities and respond quickly to threats.
So how do you keep your finger on the pulse?
With business metrics. That may not feel very exciting but the Key Performance Indicators (KPIs) and other measures of your business performance can be pretty exciting as you watch them change and show you how you're making progress.
Tracking numbers using metrics and KPIs
In essence metrics and KPIs are statistics that measure how your business is performing.
They give you a window into...
- What’s working and what needs attention
- Early warnings of any trouble you may face ahead
- How well your business is achieving
What’s the difference between metrics and KPIs?
There are a few different distinctions to be made between a metric and a KPI.
Metrics are a measurement of a business process. Without measuring things, it’s impossible to truly understand how a process is performing and if tweaks need to be made.
Metrics are used across the entirety of a business in every department, and different ones will be relevant to different team members. This is not a one size fits all process.
KPIs give metrics their all-important context. This context is linked to specifics business objectives and drives overall business performance.
Let’s look at an example of how this works...
- The number of sales in the year to date is a metric – on its own it’s hard to know if this number is good or bad
- The KPI gives you the number of sales over time – this allows you to see if sales are going up or down
- When you then compare these figures to previous years it tells you even more
- If you then set a target, this information becomes even more meaningful
Understanding metrics as a business tool
As an entrepreneur, it’s vital that you understand which metrics provide you with the right tools to run your business and make informed business decisions.
Some of the different types of metrics that can help you are:
- Financial metrics and KPIs – these cover things like where you’re spending; how you are growing in profitability and how much cash you have now and in the future.
- Business plan metrics – specific metrics that link to the goals you’ve set in your business plan
- Sales and Marketing metrics – which look at how much and how often you are selling your product or service and how well your marketing campaigns are performing
- People metrics – telling you how well your teams are performing and how engaged they are in who you are and what you do as a business
- Operational metrics – which look at how you are meeting customer demand and running as a business
There may also be other metrics that are specific to your particular industry, such as SAAS (software as a service) and customer support.
There are multiple ways to measure your business, so one important step is to know which numbers tell you most about your business. These numbers will differ from business to business.
When you’re looking at your numbers remember, a picture tells a thousand words. Making the information visual by putting them into charts and graphs on a business dashboard can really help.
Ultimately, your numbers are only meaningful if you keep accurate records of them. So, I recommend setting your business up with some great accounting software to help you keep track.
At Grant Jones we provide a business dashboard for our clients, which is linked to their accounting software. This ensures they always have their all-important numbers right at their fingertips whenever they need them. When you’re ready to implement this system in your business, give our team a call – we’d love to help you.