When coaching CEOs to increase corporate performance, we holistically assess our client’s business and look for operational variance gaps and best practices usage in the company’s business marketing, sales, strategy and financial management approaches to help them maximize their year over year growth.
Through our advisement programs, we assess their current financial position and compare their P and L’s (profit and loss reports) against their competitors from our proprietary database of financials submitted by over 50,000 CPAs. Using this analytical methodology, we have identified specific six business benchmarks that we use to chart our client’s current position as compared to their unique industry and that is used as a CEO success scorecard.
If you are looking to grow your business next year — metrics is a key business driver. If you are trying to succeed in a down economy — then your action steps must be proactive, not reactive.
Are you managing your company by business and financial metrics? Is your management team knowledgeable about your industry or are they just ambivalent?
6 Scorecard Areas You Should Manage Monthly
1. Financial LIQUIDITY: Measures your ability to meet daily financial obligations and includes:
- Inventory (or staff bench utilization rate) in stock in days
- Accounts Receivable in days
- Account Payable in days
2. PROFITS & PROFIT MARGIN: Are profitability trends favorable in the company?
- Gross Profit Margin
- Net Profit Margin
- Advertising Cost to Sales
- Rent to Sales
- Payroll Percent to Sales
- Operating Cash Flow Margin
3. SALES: Are sales growing?
- Sales Year Over Year Growth
- Sales by Product Year to Year
- Sales by Services Year to Year
4. BORROWING Capacity: Is the company borrowing profitably?
- Interest Coverage Ratio
- Debt to Equity Ratio
- Debt Leverage Ratio
5. Corporate ASSETS Usage: Is the company using gross fixed assets effectively?
- Return on equity
- Return on assets
- Fixed asset turnover
6. Employees Performance: Is the company hiring effectively?
- Revenue per employee
- Employee turnover by department
- Profit per employee
Each one of these assessment areas should be placed into a monthly scorecard that gives you month to month and year to year comparisons. If your CFO or accountant does not do it, find someone who will.
Growth can be attained for those who manage metrically — those who don’t will get the same results that they got last year . . . and may not be around next year.