- Gross Revenues
- Gross Margin (Revenues less COGS for product companies)
- Direct Profit (Revenues less direct servicing expenses for service companies)
- Payroll analysis (Where payroll is greater than 60% of revenues)
- P&L and Revenues by segment (Manufacturing, Product, Service)
- Profit (Allocation vs. Contribution)
Balance Sheet Information
One of the most significant financial shortcomings of CEOs is a failure to use the relationship between the P&L and the Balance Sheet to pick up developing trends. Pick up the items that really matter from the following list:
- Quick Ratio
- Current Asset Ratio
- Cash adequacy ratio
- Receivable Turn
- Payables
- Bank Covenants
Revenue Predictors
The financial statements show the revenue actually booked, and the key performance indicators if properly identified should get behind the sales process and provide a forecast for what can be expected to occur. The first step is to define the sales process – the steps that have to take place before a sale can take place. Usually this is a funnel where each of the following steps has less items within it:
- Cold calls
- Leads
- Appointments
- Proposals
- Follow Up Appointments
- Closed Sale
- Backlog/Booking Revenue
The technique is to measure the steps along the way and then identify the numerical relationship between each step. Once this has been accomplished, then you can start to forecast future revenue from sales pipeline activities. For example, if you know that 32% of new proposals generate revenue 90 days later then if you track the level of new proposals each month you can get a much better handle on likely revenues 90 days hence.
Activity Numbers
In many businesses, the underlying activity is just at important as the revenue numbers, and looking at revenue in isolation is not enough. This is particularly true in service businesses where it is essential to look at the relationship between activity and revenues – time billed, percentage of time paid for that is billed to customers, number of service calls, etc. Look behind the numbers and identify what is important from the following:
- Transaction volumes
- Units shipped
- Number of service calls
- Purchases
- Inventory expenditures
- Trucks Dispatched
Look at activity levels in your business and see whether there is a correlation that you should be measuring.
Freedom from you business indicator
As well as financial indicators, there are a number of non-financial areas that need to be watched and it is important to identify the key indicators that need to be tracked on a consistent basis.
Look at your goals and identify what you can track. Some examples might include:
- Hours per week worked
- Golf games per month
- Health/Exercise/Weight
- Dinner with family
- Vacation
- Hobbies
Put them on your private dashboard and measure your progress.
