Throwback ⏰: Pick 3 business metrics to focus on – then ignore the rest
There’s a near-endless supply of business metrics to choose from. Every single software now includes some sorta metrics dashboard. There’s financial metrics, operating metrics, marketing metrics, sales metrics, project metrics, human resources metrics, metric metrics, and so on. And, the reality is that 99% of those metrics are a waste of time. You don’t need a million numbers and data sets to get a grasp of your business. You just need a quick “are things going well? cool” then back to paid client work.
Let’s think about driving a car, for example. There’s a dashboard covered in lights, warnings, dials, and various options. But, when it comes to everyday operation, you typically only care about a few of those. On an average day, I only really care about speed, gas in the tank, and what I see thru the windshield. That’s it. Is the air pressure in your tires important? Sure. Do you need to check it every day? Not really. The same goes for your business and business metrics. They’re all good, but frequently checking them is a distraction from what’s really important.
Align with your goals :
Measure what’s important to you and your business. Sometimes, that’s easier said than done. First, you’ll need to figure out what’s important. Then, you’ll need to figure out what’s a true indicator of success. For example, if new revenue is important, you could track ‘Scheduled appointments’ but, if you get a lot of bad leads, no-shows, and tire-kickers, that metric might be misleading and you should go with something more concrete like ‘Client deposits taken.’
Indicate the health of your business:
You want at least one metric that indicates the overall health of your business. (But, it’d be best if they all tie-back to it in some way.) An overall health metric is your warning indicator – your canary in the coal mine. If something happens to it, you need to dig into your business and all the less important metrics to see what went wrong.
Make sure they’re accurate
You can’t base business decisions on inaccurate numbers. So, only use metrics you’re 100% sure are correct. For example, if you aren’t logging absolutely everything in your CRM, you shouldn’t use the metrics your CRM gives you because they’ll be missing the full picture. (And, this is part of the reason why I’m a stickler for correct accounting because, even when you ignore the potential audit risk or tax overpayments, incorrect accounting can’t be used to make decisions.)
Easy to calculate:
Good metrics should be easy to read on the fly. They should already exist somewhere in your software and not require manual calculations every time you want to look at them. For example, profit vs EBITDA (earnings before interest, taxes, depreciation, and amortization). Big business loves EBITDA. It’s one of the standard numbers to look at. But, it’s not a readily available number in small business accounting software whereas profit is.
Chosen metrics can change :
Your metrics aren’t set in stone. They can change based on the situation and your objectives. For example, I like to use ‘work-in-progress tax returns’ during tax season. But, outside of tax season, it wouldn’t make sense and I switch to either another marketing metric or a big project metric (for example, progress on a major audit and clean-up job).
Pick 3 metrics.
I’m currently using:
- Profit & Loss report (just a cursory review) (overall health metric)
- newsletter subscribers (marketing metric also a forward-looking health indicator)
- work-in-progress tax returns (project metric aka an in-the-weeds metric)
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