What key performance indicators do you use to track how you are doing? While it varies by type of business, most companies track sales, new business, margins and profit at a minimum. While the numbers can tell you a lot, the trends can tell you more. Regardless of which metrics you choose, the real value comes from looking at two things:
How does it compare to the past three to six months?
How does it compare to the same period last year and/or prior years?
Are you running ahead, flat or behind? Are all the numbers trending in the same direction? For example, if sales are up, are your profits doing the same? Armed with this information, you can better identify where you need to put your time and other resources.
To Demonstrate This Point
I had a conversation recently with an owner of a service company who was looking to grow sales. Sound familiar? I get it a lot. But as I started to ask questions and look at some trends, I saw the light bulb go off in his head. Here’s why.
Sales were up about 10% versus last year and running about even with the year before. Definitely trending in the right direction but nothing to write home about. At the same time, gross profit was actually down about 5% and had been declining over the past three years. Direct labor, operating inefficiencies and non-ideal customers had caused the decline – and it had gone unnoticed.
This exercise helped redefine the strategies for the coming year. Sales growth is still important, but profit improvement is now the top priority – and his plan for next year reflects this.
As you plan and prioritize throughout the year, go beyond the numbers. Look at the trends and you may just uncover some hidden gems to put more on your bottom line and in your bank account!