Most businesses and organizations naturally pay attention to 2 critical performance metrics – revenue and profit. Some may refer to “revenue” as sales, income, fees, etc. However it is labeled, it means the same thing – how much money you are bringing in.
The word “profit” might mean different things to different people/businesses. For examples, there is profit after direct costs, commonly referred to as gross profit, and there is profit after direct costs, sales costs, and general/administrative costs, commonly referred to as net profit.
Unquestionably, these are vital metrics. But they aren’t everything.
6 categories of metrics
There are 6 commonly referenced categories of performance metrics, as follows:
- Sales & Marketing
- Social Responsibility
Revenue and Profit are good examples of financial metrics. But there are any number of additional metrics that you might be concerned with, like Cash on Hand, Accounts Receivable and Accounts Payable. Each of these can have an impact on the other, so don’t look at any of them in a vacuum.
New Customers and Website Visitors are examples of sales and marketing metrics. Customer Retention Rate and Customer Complaints are examples of customer metrics. Employee metrics might include things like Average Employee Tenure and Time to Hire.
Examples of operational metrics include things like Quality and First Time Resolution (of customer issues). Volunteer Hours and Energy Consumptions are examples of social responsibility metrics.
2 Rules of Thumb
It can be a bit challenging to identify the metrics that are important to you. When you look at a pre-defined list of potential metrics, it’s tempting to say, “This one makes sense,” over and over again until you suddenly have a long, unmanageable list of them.
So a good rule of thumb is to identify 1 to 3 metrics in each of the 6 categories. That will keep you well beyond the narrow view of simply tracking revenue and profit, but will keep your list of metrics to a manageable few.
A second rule of thumb is, once you have identified which metrics to track, set targets for each of them. Measuring without a target is an exercise in futility. What is the end game? What are you trying to achieve? Not only does setting targets add meaning to your metrics, it helps you to focus on the tasks, energy and resources needed to achieve the targets.
What metrics should I track?
The answer to that lies with you and your stakeholders. What is important to you? What does success look like to you? If you are unsure, sit down with your trusted advisors, team, and customers. Ask them. Compare their answers to yours. Then set your metrics.
The good news is you can change them any time it makes sense to do so.
We have you covered
The Plan Canvas software comes pre-loaded with over 50 common key performance metrics (KPI). If we don’t have metrics that are important to you, you can add as many of your own as you’d like.
For a demo of Plan Canvas, click here.
So what metrics are important to you? We would love to hear from you.