…asks Peter Hickey, President of the Institute of Business Advisors & CEO of MAUS. “What concerns me is that so many people are starting or building a Business Advisory but their 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 Peter Hickey hick@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 suggestions 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
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
- Lead time, from order to delivery
- Lead time, suppliers
- Lead time, production
- Average time for decision-making
- Inventory turnover time
- Improvement in productivity
PEOPLE
- Employee suggestions 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)
Peter Hickey | MAUS
Peter is the founder of MAUS Business Systems, a firm that started as a business consultancy and grew into a software company. The company was listed as one of BRW’s fastest growing 100 private companies in 2000. It was successfully built from a one-man business to a multi-million dollar concern. The business was acquired by a multi-billion dollar publisher, before Peter re-acquired the business 6 years later.
MAUS now has one of the largest ranges of cloud based SMB management tools and business advisory tools in the world. The company has 50 worldwide partner offices, and has helped over 60,000 users to achieve their business goals.
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