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Most businesses rely heavily (if not, exclusively) on traditional business metrics such as those which arise from the accounting records and financial statements: profit and loss (income, costs and profits), balance sheet movements (assets, liabilities and shareholders’ funds), and cash flow. These financials provide a robust view of the company’s performance in a given period, and changes over time show important trends which need to be heeded. But, they suffer from being historical and after-the-fact and, as a result, can lead to slow and ponderous decision-making which is less effective in our highly disrupted, competitive, tech-driven economy.

The alternative is make greater use of dynamic metrics, numbers which are rapidly available (if not available in real-time) and which allow for faster decision-making and taking advantage of more immediate threats and opportunities. [Read more…] about Dynamic Business Metrics

Risk Metrics will be viewed by risk managers (where the company has a separate risk function) or by its Board or senior management team (functional directors) in a smaller business. They will also be of importance to external stakeholders such as investors and lenders/creditors. The company should track areas of risk and uncertainty which hold the greatest potential danger for the business if external shocks or changes were to cause sales to decrease or other deterioration of the company’s results. Cash flow is considered the primary risk metric as it gives a clear indication of both the health and sustainability of the business.

Typical risk metrics may include:

1. Net cash flow in a given period and over the last few periods or years. This is particularly important if negative (cash outflow). [Read more…] about Business Metrics: Risk

Profitability or Efficiency Metrics will be viewed by Production, Operations and Fulfilment/Logistics departments and show the efficiency with which the company is creating and delivering its products or services to its customers.

Typical profitability metrics may include:

1. How much it costs to make the product being sold, e.g. unit costs by product or by product category, total costs of goods sold (in aggregate, or split out by specific item of production). [Read more…] about Business Metrics: Profitability or Efficiency

Sales or Revenue Metrics will be viewed by the Sales or Marketing departments and show how well (or badly) the company is performing at selling its products or services in the marketplace. All sales-related numbers are included, including those which look at sales from the top-most, big-picture level (e.g. how much did we sell in USA last month), right down to the most granular (how many people responding to one particular pay-per-click campaign went on to buy the product being advertised).

Typical sales metrics may include: [Read more…] about Business Metrics: Sales or Revenue