If you are one of the ones currently hiding from your financials, your KPIs and make decisions based solely on what feels good - this article is for you!
The simplest answer: Because hiding from them doesn’t make your situation any better. A lot of entrepreneurs know the basics, most of them can answer the question of revenue per month. But once you dig one level deeper and ask for profitability they are lost.
Personally, I believe that this is not how business owners of successful companies should be acting! If we ask any CEO of the Fortune 500 companies, do you think they won’t know their numbers? Well I don’t think so either.
Knowing your numbers, tracking revenue, expenses, profitability and other relevant KPIs means you can spot trends and changes immediately and always be on top of decision making. Informed decision making this is, not the one purely from the gut because “this launch feels off”.
Before we can start tracking anything we need to know what exactly we are supposed to track.
Meaning those numbers that are most relevant to your business and industry. Without putting in a good amount of thoughts and defining the most meaningful KPIs, you might as well be watching the sky for signs that your business is successful.
KPIs will be different for every industry and business. Revenue & profitability is relevant for almost any company. Additionally think about what directly impacts your business outcomes, how do you want to measure success based on specific goals and targets you have in your company?
Some examples of the most common KPIs are: Average Profit Margin, Sales Per Rep, Average Cost Per Lead, Funnel Conversion Rates, Marketing spend per customer, Lifetime value of a customer, Customer acquisition cost, Website traffic, Page views, Followers growth, Social shares, Click thru rate, Email Opening rates
As you can see there is a lot of different KPIs to choose from, so make sure to take your time, do some research, talk to mentors / employees to figure out which numbers to focus on.
So just knowing what to track will not help us get anywhere.
We want to have one place with all numbers right in front of us: our KPI dashboard. Our goal with this is: To get a good overview over time to spot trends and tendencies and also at any given time be able to see your numbers and draw conclusions from them.
You can either go with a KPI tracking software out there … or especially when you are just starting out you can start as simple as possible: start with an excel or google sheets document.
Make sure to create different sheets for every different number you are tracking, so revenue would have one sheet, leads generated another … and then the top sheet, the very first one is the actual dashboard, the visualization of your numbers. Most likely this will be a combination of tables, bar charts, pie charts etc.
Every week from now, probably the most logical would be either Friday or Monday fill your sheets with all the relevant information. So that over the weeks and months you are doing it you are building a timeline of your own business, making sure you see all relevant information with one look at your financials.
If all of this is new to you… don’t worry, as I said before, quite a few entrepreneurs try to hide from their numbers which never ends well so congratulations first of all for wanting to change this and now just take it one step at a time!
In part 2 next week, we will talk about how we are now going to use this information on a weekly basis.
If you have any questions, feel free to email me at [email protected] and I will talk to you soon!