We’ve reached the middle of the calendar year. So how are things going for your business? Conversationally you might say, “Pretty good.” But, analytically, can you put a number on how well you’re doing — or several numbers for that matter? You can if you choose and calculate the right key performance indicators (KPIs).

4 common indicators

There are a wide variety of KPIs to choose from. Here are four that can give you a solid snapshot of your midyear position:

1. Gross profit. This figure will tell you how much money you made after your manufacturing and selling costs were paid. It’s calculated by subtracting the cost of goods sold from your total revenue.

2. Current ratio. This ratio will help you gauge the strength of your cash flow. It’s calculated by dividing your current assets by your current liabilities.

3. Inventory turnover ratio. This ratio will warn you ahead of time if certain items are moving more slowly than they have in the past. It also will tell you how often these items are turned over. The ratio is calculated by dividing your cost of goods sold by your average inventory for the period.

4. Debt-to-equity ratio. This ratio will measure your company’s leverage, or how much debt is being used to finance your assets. It’s calculated by dividing your total liabilities by shareholder’s equity.

Customized KPIs

KPIs aren’t limited to widely used ratios. You can make up your own and apply them to any area of your business.

For example, let’s say the company’s goal is to improve its response time to customer complaints. Its KPI might be to provide an initial response to complaints within 24 hours, and to eventually resolve at least 80% of complaints to the customer’s satisfaction. You can track response times and document resolutions and eventually calculate this KPI.

As another example, say your business wants to improve its closing rate on sales leads. Its KPI could be to convert 50% of all qualified leads into customers over the next six months with the goal of raising this percentage to 60% next year.

Notice that these KPIs are both specific and measurable. Just saying that your company wants to “provide better customer service” or “close more sales” won’t produce a sound KPI.

Good decisions

Midyear is the perfect time to stop, take a breath and objectively assess your company’s performance. This way, if things are really going well, you can determine precisely why and keep that momentum going. And if they’re not, you can figure out how you’re ailing and adjust your budget and objectives accordingly. Our firm can help you choose the KPIs that will provide the information you need, as well as help you apply that data to good business decisions.

© 2019

Posted
AuthorKeri Raby

Can your business become more profitable without venturing out of its comfort zone? Of course! However, adding new products or services may not be the best way for your business — or any company — to boost profits. Bottom-line potential may lie undiscovered in your existing operations. How can you find these “hidden” profits? Dig into every facet of your organization.

Develop a profit plan

You’ve probably written and perhaps even recently revised a business plan. And you’ve no doubt developed sales and marketing plans to present to investors and bankers. But have you taken the extra step of developing a profit plan?

A profit plan outlines your company’s profit potential and sets objectives for realizing those bottom-line improvements. Following traditional profit projections based on a previous quarter’s or previous year’s performance can limit you. Why? Because when your company reaches its budgeted sales goals or exceeds them, you may feel inclined to ease up for the rest of the year. Don’t just coast past your sales goals — roar past them and keep going.

Uncover hidden profit potential by developing a profit plan that includes a continuous incentive to improve. Set your sales goals high. Even if you don’t reach them, you’ll have the incentive to continue pushing for more sales right through year end.

Ask the right questions

Among the most effective techniques for creating such a plan is to consider three critical questions. Answer them with, if necessary, brutal honesty to increase your chances of success. And pose the questions to your employees for their input, too. Their answers may reveal options you never considered. Here are the questions:

1. What does our company do best? Involve top management and brainstorm to answer this question. Identifying your core competencies should result in strategies that boost operations and uncover hidden profits.

2. What products or services should we eliminate? Nearly everyone in management has an answer to this question, but usually no one asks for it. When you lay out the tough answers on the table, you can often eliminate unprofitable activities and improve profits by adding or improving profitable ones.

3. Exactly who are our customers? You may be wasting time and money on marketing that doesn’t reach your most profitable customers. Analyzing your customers and prospects to better focus your marketing activities is a powerful way to cut waste and increase profits.

Get that shovel ready

Every business owner wishes his or her company could be more profitable, but how many undertake a concerted effort to uncover hidden profits? By pulling out that figurative shovel and digging into every aspect of your company, you may very well unearth profit opportunities your competitors are missing. We can help you conduct this self-examination, gather the data and crunch the resulting numbers.

© 2019

Posted
AuthorKeri Raby

A strong economy leads some company owners to cut back on marketing. Why spend the money if business is so good? Others see it differently — a robust economy means more sales opportunities, so pouring dollars into marketing is the way to go.

The right approach for your company depends on many factors, but one thing is for sure: Few businesses can afford to cut back drastically on marketing or stop altogether, no matter how well the economy is doing. Yet spending recklessly may be dangerous as well. Here are three ways to creatively get more from your marketing dollars so you can cut back or ramp up as prudent:

1. Do more digitally. There are good reasons to remind yourself of digital marketing’s potential value: the affordable cost, the ability to communicate with customers directly, faster results and better tracking capabilities. Consider or re-evaluate strategies such as:

  • Regularly updating your search engine optimization approaches so your website ranks higher in online searches and more prospective customers can find you,

  • Refining your use of email, text message and social media to communicate with customers (for instance, using more dynamic messages to introduce new products or announce special offers), and

  • Offering “flash sales” and Internet-only deals to test and tweak offers before making them via more expansive (and expensive) media.

2. Search for media deals. During boom times, you may feel at the mercy of high advertising rates. The good news is that there are many more marketing/advertising channels than there used to be and, therefore, much more competition among them. Finding a better deal is often a matter of knowing where to look.

Track your marketing efforts carefully and dedicate time to exploring new options. For example, podcasts remain enormously popular. Could a marketing initiative that exploits their reach pay dividends? Another possibility is shifting to smaller, less expensive ads posted in a wider variety of outlets over one massive campaign.

3. Don’t forget public relations (PR). These days, business owners tend to fear the news. When a company makes headlines, it’s all too often because of an accident, scandal or oversight. But you can turn this scenario on its head by using PR to your advantage.

Specifically, ask your marketing department to craft clear, concise but exciting press releases regarding your newest products or services. Then distribute these press releases via both traditional and online channels to complement your marketing efforts. In this manner, you can make the news, get information out to more people and even improve your search engine rankings — all typically at only the cost of your marketing team’s time.

These are just a few ideas to help ensure your marketing dollars play a winning role in your company’s investment in itself. We can provide further assistance in evaluating your spending in this area, as well as in developing a feasible budget for next year.

© 2018

Posted
AuthorKeri Raby