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The Numbers I Check to Monitor the Health of My Busines

By June 29, 2017 One Comment

I was recently asked this question:

What numbers do you check daily (or weekly) to monitor the health of your business? And, how do you do this so that it’s quick and easy?

Every business is different.

No, it is not. But, I do have different customers, different people, and different processes. All true, but the numbers, the percentages, and the metrics that you should be tracking are nearly identical to other businesses that share your basic business model.

In my research, there are only 6 different business models and one non-profit model that exists in the world.

For example, is Ford different from Boeing? One makes planes while the other makes cars. One does a tremendous amount of government contracting and the other is doing a ton of business overseas. One business is based in Seattle and one is based in Detroit. You don’t ever want to tell people from Detroit that they are just like people from Seattle, and I am sure the reverse is also true.

Yet, these two businesses are not very different. At their core, these are manufacturing businesses. Ford tracks auto sales and Boeing tracks jet orders. Ford measures inventory and sales backlog, so does Boeing. Boeing tracks inventory turn, so does Ford. Ford tracks employee utilization and revenue per employee, so does Boeing. Boeing tracks their return on assets and so does Ford.

Businesses are unique; but business models are universal and the metrics that all businesses track are common.

There are three metrics that I believe nearly every business should track, and I call these the Triple Bottom Line. The Triple Bottom Line is three metrics that quickly tell you how profitable you are, how much cash your business generates, and if your business is getting safer or more risky (weaker).

The Triple Bottom Line is:

1. Net Operating Income: Net Operating Income (NOI) is a measure of the profit generated by the operations of your business.
2. Cash from Operations: Cash from Operations is a measure of the cash generated by the operations of your business.
3. Net Equity: Net Equity measures the safety and strength of the business. A growing net equity signifies a strengthening business and a declining net equity signifies a business that is getting weaker.

Other than these three core metrics, I have put together a list from TGG that outlines the top 5-15 key metrics for various business models.

Service Business Metrics:

• Gross Profit Margin
• Employee utilization (measured on a hours billed per week divided by 40)
• Average Hourly Rate
• Daily Billable Hours Vs. Break-Even required daily Billable Hours
• Revenue by service line
• Gross profit margin by service line
• Overhead cost per employee
• Cost of Overhead as a percentage of revenue
• Sales per employee
• Return on Investment in Marketing
• Sales Pipeline and Sales Conversion
• Revenue by Customer
• Gross profit per customer
• Customer retention %
• Employee retention %
Current Ratio
DSO (Days Sales Outstanding)

Inventory Based Businesses:

• Quick Ratio
Inventory Turns
Warehouse utilization %
• Cash Conversion Cycle
• Revenue per product
• Gross Margin per product
• Gross profit per salesperson

Brick and Mortar Businesses:

• Traffic per day
• Customers per day
• Average sale per customer
• Same store sales (year-over-year and month-over-month)
• Sales per product
• Gross margin per product
• Sales per employee
• Number of items per sale

E-Commerce business:

• Daily Site Visitors
• Bounce Rate
• Conversion Rate
• Repeat purchaser rate
• Customers per day
• Average sale (“cart”) per customer
• Sales per product
• Gross margin per product
• % returns
• % discounts

Manufacturing Business:

• Return on Invested Capital
• Quick Ratio
• Cost of Goods Sold
• Gross Margin per product
• Product Throughput- Labor Productivity
• Equipment Utilization
• Sales per employee
• Average Labor cost per hour
• Quality Metrics (Defect Rate)
• Waste/Theft
• Cash Conversion Cycle

Asset-Based Businesses (Real Estate, Asset Managers, Etc.):

• Return on Equity
• Debt to Equity Ratios
• Cap Rates (Return on Assets)
• % Annual Investment Appreciation
• New Deal Pipeline
• Average Cost of Capital
• Administrative Expenses per Employee
• Assets Per Employee
• Return on Invested Capital

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