We all know the cliche of ‘what you don’t know won’t hurt you’ and while that may be true in some cases, in the world of small business, nothing could be further from the truth. Monitoring business metrics is crucial to your success. Without it you cannot make progress because you don’t know where you are. More importantly, without it you have zero insight as to where your business is headed.
Why Your Small Business Metrics are so Important
Small business owners can shy away from measurements because they feel that their small business metrics are complicated, but they don’t have to be. Advancements in technology have made business intelligence easy and affordable. By monitoring a few key metrics you can improve your business profitability and efficiency. Plus, metrics can now be viewed on-demand and in a multitude of visual formats to make understanding them a snap.
Business dashboards have become a critical part of the management of complex information across both industries and functional areas. Dashboards are also increasingly important components of business strategies because they help improve corporate performance. This growth in dashboard usage is based on many things, but the biggest reason is that dashboards provide a visual information across many data sources. Everything is centrally located and formatted in an easy to understand way.
The key benefits dashboards bring to your small business metrics are:
• The graphic format enables users to quickly identify performance issues and study the root causes behind any problems.
• Performance information is presented in an organized format aligned around key goals and objectives.
• By moving away from manual methods of integrating and disseminating information, dashboards are more time efficient and less costly than traditional methods.
However, it is important to remember that for a dashboard and the metrics it provides to be beneficial to your business, performance metrics must be taken into consideration the same way you would your financial metrics. They must become a part of your business’ core decision making practices.
And while your business metrics should tell a story about your brand, that story should be able to compete with industry standards. Make sure that when you are developing your business metrics that you review what your industry measures. If possible, compare how other businesses in your vertical are measuring their business and what specific measurements have been established for your industry.
What Do Small business Metrics Look Like?
Here is an example: If your business is a professional service firm that mainly sells time in exchange for services, then you are likely concerned about your average cost of paying staff per hour as it relates to average revenue per hour. It’s likely that you’ll also be concerned with ratios like revenue per employee and sales-to-wages.
Likewise, if you manufacture products, your concern will be the efficiency of your inputs, including materials (and scrap), labor, contractors, and other direct costs. In essence, you need to look at the major determinants of your gross margin.
If you still aren’t convinced that you should abandon your spreadsheets for a dashboard, ask yourself some questions: Do you think it would help you to better manage your business if you were able to view industry tailored metrics that show you how your business is performing at any given time? Would it help to have real time information on your business in a visual format so that you can judge performance at a glance?
Even if the daily metrics provide bad news, knowing about it will still reduce your anxiety because you will at least have the opportunity to do something about it before the problem worsens. Using dashboards not only decreases the anxiety felt by many CEOs but it also increases your strategic insight. Making dashboards a part of your business strategy will help empower you to make the right decisions to improve cash, profits, and financial health
As small businesses continue to search for ways to improve their performance, promote operational efficiency and improve their customer experience, the data that results from all of that effort becomes increasingly more important and complex. Dashboards might just be the solution to making sense of all of the complex information that is important to you business success.