Header Ads


All you need to know about business performance in 5 metrics By Roy Osing

There are hundreds of possible metics you can use to understand how your business is performing, but these critical five will tell you all you need to know.

1. Customer perception. What percentage of your customers feel you offer "amazing" service? Is the perception on the rise or declining? Many organizations use internal measures of service: statistics generated by systems that manage the service process. 

I have seen problems when you rely only on internals. They may suggest you are performing well, but the results are at odds with what the customer says. 

Use internal stats as a diagnostic tool to understand customer perception data, but don't rely on them as an accurate measure of how customers feel about your service.

2. Top line revenue . Gross revenue is the expression of how the market views the value you provide your customers. 

It is an excellent bellwether of whether or not your customers love what you do for them, or not. 

3. Operating margin. Some refer to it as EBITDA - earnings before interest, taxes, depreciation and amortization - which tells you how much of each dollar of revenue you have left accounting for the costs of producing it. 

The higher the operating margin, the more efficient you are in production activities. When margin is low, it means your operating expenses are too high; you are relatively inefficient at revenue generation.

4. Customer share. Often referred to as "share of wallet", this metric describes the proportion of the customer's business that you have  versus your competitors. 

A high percentage and you are doing a great job of penetrating the account with your solutions (but you are probably a target for your competition); a low percentage and you have room to sell and a have healthy growth potential. 

Most organizations measure market share. The problem I have with the metric is that it is an expression of your piece of the TOTAL market including the customers you are not targeting. It really doesn't tell you how effectively you are selling to those customers you have chosen to focus on 

5. Customer retention. How many customers leave you every month? Are you losing more than you are acquiring? A loyal customers’ base is necessary if a business is to constantly grow and have some degree of stability. 

Correlating retention data with revenue provides an insight into why, for example, revenue is increasing (or decreasing). Is the driver more customers, or greater share from your targeted customer base that is relatively stable?

Some organizations have a "Performance Results" function which can get infatuated with measuring as many performance variables possible.

Don't go there. 

Keep it simple. 

Keep it to the critical few.

About Author

Roy Osing (@royosing) is a former President and CMO with over 33 years of leadership experience covering all the major business functions including business strategy, marketing, sales, customer service and people development. He is a blogger, content marketer, educator, coach, adviser and the author of the book series Be Different or Be Dead

No comments