In order to be effective, a good business tool must be simple, easy to deploy, and provide clear benefits. That, in a nutshell, describes a dashboard. “Like the sun rising in the morning, dashboards are reliably available—same time, same day of the week, without fail, regardless of sickness or bad numbers,” says Jim Drew, a business coach and consultant specializing in CEO-level strategy and leadership. Dashboards provide a simple, one-page snapshot of the key performance indicators (KPIs) you select for your business, and you can customize them to cover the three or four critical issues you most want to track at any given time.
Standard indicators that all businesses should be tracking include revenue, profit margin, percent of repeat business, customer lifetime value, average order/transaction size, type of product or service purchased, and marketing source for the transaction, says Yoon Cannon, a serial entrepreneur and business growth coach. Choosing the right KPIs to include in your dashboard is a function of the industry you are in and the specific goals laid out in your most recent business plan or strategic plan. (Retail metrics firm Kipfolio offers this link, which illustrates of some common KPI metrics [conversion rate funnel, sales per square foot/location, average purchase value, cost of goods sold, etc.] in dashboard report form.]
“For example, at a staffing company, the number of hours booked for the temporary workers placed is a key driver of profitability and should be included in the dashboard,” Cannon says. “Profitability at a landscaping company, on the other hand, might be more directly affected by how well job-costing numbers are being met. Having that KPI in a dashboard can help to hold project managers accountable for getting their crews to finish installations on time or ahead of schedule.”
Growth-oriented businesses doing up to about $1 million in annual revenue should focus on KPIs with the most direct impact on cash flow and profits, says Sabrina Parsons, CEO of Palo Alto Software, a developer of business planning and marketing tools for growing businesses. The time periods used for measuring KPIs are also important. Businesses in the early stages of growth should always compare KPIs to the previous period (this month vs. last month), the same period last year (this month vs. same month last year), and the planned forecast (what your business plan or financial projections call for you to be achieving).
Drew Williams, managing partner at business consulting firm nuRevenue Partners and co-author of Feed the Startup Beast (McGraw-Hill, June 2013), says the most important advantage a dashboard provides to growth-stage companies is an answer to the question, “Am I on track to meet my annual objectives?” “The benefit, of course, is knowing that your business is headed in the direction you set out for it, and the sense of control that imparts,” he says. “Control and visibility make for a happy, less stressed, more empowered owner.”
Dashboards are easy to come by. They’re available as off-the-shelf software or on a subscription basis via the cloud, but the concept is simple enough that many companies choose to make their own. “You can easily create your own dashboards in a simple Word document which you populate with whatever metrics you choose,” Cannon says. “You can also get great dashboards from Excel.” Canon recommends this free resource for finding a range of Excel templates.
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