What are Some Common Business Measures?
In a well-run organization, leaders “manage by the numbers.” They measure and monitor business performance to improve results, and to guide problem-solving and decision-making. These numbers can be expressed as leading indicators (real-time) or lagging indicators (historical). A few key numbers drive the success of every company—including YOURS!
Balanced Scorecard Measures
Performance measures are often established using a tool called the Balanced Scorecard. These measures reflect a company’s current strategy and goals. Below are some commonly used measures within the four perspectives of the Balanced Scorecard. Focus on the few numbers that matter most and ignore the rest, unless they become important.
Financial Measures
Sales or Revenue
Sales growth
Gross Margin or Profit
Contribution Margin
Profit Margin
Profit or revenue per employee
Return on Investment (ROI)
Dividends
Cash flow
Days in A/R (e.g., average of 75 days for collection)
Days Held in Inventory (e.g., 90 days of stock on-hand)
Inventory Turnover Ratio (e.g., 4 inventory turns per year)
Current Ratio (current assets divided by current liabilities)
Quick Ratio (current assets minus inventory, divided by current liabilities)
Debt to Equity
Customer Measures
Customer satisfaction
Customer retention/loyalty/referrals
Customer complaints/customers lost
Return rates
Response time per customer request
Customer lifetime value
Customer acquisition rate
Number of customers
Annual sales per customer/Re-order rate
Average purchase per customer
Win rate (sales closed/contracts signed)
Marketing cost as a percentage of sales
Number of ads placed/response rate/proposals made
Sales volume/per channel/per square foot of space
Frequency of sales transactions/mean time between sales
Average customer size
Customers per employee
Customer service expense per customer
Process Measures
Average cost per transaction
On-time delivery/response time to customer requests
Average lead-time
Inventory turnover
Labor utilization rates
Defect percentage/Rework
Break-even point
Cycle time
Warranty claims
Waste reduction
Space utilization
Frequency of returned purchases
Downtime
Employee Learning and Growth Measures
Employees with advanced degrees/participation in professional or trade associations
Training investment per employee
Average years of service
Number of cross-trained employees
Absenteeism
Turnover rate
Employee satisfaction
Reportable accidents/Lost time accidents
Employee productivity
Training hours/certifications/leadership development
Personal goal achievement
Timely completion of performance appraisals
Financial Ratios
The above list will get you thinking about various ways to look at your business and measure performance. Many of the financial measures listed are lagging indicators known as business or financial ratios. They are often looked at by investors or bankers. Some of the common financial ratios are described with formulas at the following online locations:
NetMBA
Missouri Business
Financial Ratios Calculator
Get everyone in your company behind the critical numbers that drive your business strategy and goals. People should know everyday how they are measuring-up. Constant feedback is a powerful motivating tool.
Wishing You Prosperous Times,
Ron Carroll
P.S. – Box Theory™ Software provides a wizard for creating quick measurement reports, identifying key performance indicators, and displaying results on your home page dashboard—pretty slick. Check it out!