My favorite two KPIs you probably aren’t tracking
Everyone knows about metrics like the current ratio, gross and net margins, or Days Sales Outstanding. These are all important for their own reasons and we use them often.
Here are two others that I like to use to draw other operational conclusions.
Sales ROI: How effective is your sales team at generating revenue?
Take your monthly revenues produced by your sales team and divide it by all the costs associated with them. This could include their salaries, their allocation of overhead, vehicles, mileage, training, etc. This will produce a multiple that illustrates you’re generating 3x your sales expenses in revenue, as an example. Track this on a monthly basis and it’s a great way to follow the performance of the sales department over time, set goals for the future, and identify signs of underperformance early.
Operating Expenses per Employee:
As you experience variability in your OpEx or you’re in a period of high employee growth or turnover, tracking your OpEx by number of Employees is a good way to figure out how much overhead you can comfortably carry based on your size. You’ll find a sweet spot over time – a figure that is high enough that it provides your employees the resources they need so as to not stunt your growth, but a number low enough that it’s not eating into your margins with wasteful spending. Compare this over time with a metric like your net margin to see how they correlate.
Not all metrics are applicable to all businesses, but I find these two can be used fairly consistently, but at the same time are not commonly tracked by management.
Have any metrics of your own that have been helpful for you? I’d like to hear about them – email me at email@example.com