“What sank the titanic?…” the top of the iceberg or the bottom!”
Peter Hickey, President of the Institute of Business Advisors & CEO of MAUS asks.
“What concerns me is that so many people are starting or building a Business Advisory but there seems to be a lack of training on the fundamentals of strategic metrics and Business Planning.
I want you to imagine a typical iceberg. At the top of the iceberg we have KPI’s (Key Performance Indicators” such as Sales, profit and Cash. All extremely important and determinants of success and failure – but these are what we called lagged KPI’s
When you look at this picture above you can see that the areas below the waterline, drive the top level goals. The clear message that we send to Business Owners is that monitoring sales, profit and cash at the end of each month is the starting point of good business management…but you need to expand your monitoring to include non-financial KPI’s.
Two simple examples…
• Number of leads or web visitors is an indicator that future sales are likely to occur.
• 0r if we ensure that staff have weekly telephone script training sessions then this ensures that sales conversion rates remain high and the business continues to meet sales targets. In this case a KPI could be a monthly target of 4 (ie 4 sessions)
As a Business Advisor we strongly recommend that you encourage your clients to expand into a greater level of KPI’s. Below are some more examples of KPI’s. The Institute of Advisors is running a course on this on May 24th in Sydney as well as a Certified Business Advisor credential. Contact Chris Palmer sales@maus.com.au for more details.
Sample KPI’s
CUSTOMER
Number of customers
Market share
Average value sale
Customers lost (no. or %)
Average time spent on customer rel’s
Sales closed / sales contacts
Satisfied customer Index
Number customer service calls
Customer loyalty Index
Number of complaints
Refunds
Marketing expenses
Average duration customer relat.
Number customer visits
PEOPLE
Employee suggest’s for improvements
Employee suggestions implemented
Patents pending
Satisfied employee Index [research]
Ratio new / established products
Employee buy-in ($ or %)
Marketing expense / customer
Investment in developing new markets
FINANCIAL
Revenue
Profit
Cash
Total assets
Total assets / employee
Revenues / total assets
Revenues / employee
Profits / total assets
Return on capital employed
Profit margin
Return on investment
Total costs
Market value
SYSTEMS & PROCESSES
Number of calls by accounts receivable, sales or customer service.
Administrative expense / totals revenue
On-time delivery
Average lead time
Lead time, product development
“X“ , from order to delivery
“Y“ , suppliers
“Z“ , production
Average time for decision-making
Inventory turnover time
Improvement in productivity
PEOPLE
Employee suggest’s for improvements
Employee suggestions implemented
Patents pending
Satisfied employee Index [research]
Ratio new / established products
Employee buy-in ($ or %)
Marketing expense / customer
Investment in development new markets
INNOVATION
Revenue from new products
Expense on R & D
R & D expense / total expenditure
IT development expense / IT tot. expense
Hours, R & D (no. or %)
Investment in training
Investment in research (e.g., customer)