Flying and Clarity

“Is this plane safe?”

“I can answer that after we land.”

Would you get on that airplane?

Sounds ridiculous?

And yet, flying and landing an airplane is much easier than running a business.

According to the U.S. Bureau of Labor Statistics, roughly 20% of small businesses fail within the first year.

Imagine if 20% of all airplanes crashed within their first year of operations

And yet, despite the huge number of failures, many business owners prefer to fly blind and not look at the financial metrics and what they are telling them about the business.

In this post, I’m going to leverage a bit of OpenAI and ask it what KPIs you should look at on a daily, weekly and monthly basis.  Feel free to read through it and let me know your thoughts on how many of these you look at and how frequently.

Please note the KPIs depend on your industry, market, etc but let’s have fun with these:

Daily:

1. Cash Position: Understand how much cash is on hand.
2. Daily Sales: Measure the total sales for the day, especially vital for businesses like retail.
3. Daily New Leads/Inquiries: Track how many new potential customers have shown interest.
4. Inventory Levels: For businesses with fast-moving goods or perishables, it’s vital to ensure stock levels are adequate.
5. Customer Support Tickets: Monitor the number of new tickets and unresolved issues to ensure customer satisfaction.

Weekly:

1. Sales Conversion Rates: Understand how many leads or website visitors are converting into customers.
2. Accounts Receivable Aging: Monitor overdue accounts to manage cash flow effectively.
3. Employee Productivity Metrics: For businesses with daily operations like manufacturing, it’s essential to ensure that employee output meets expectations.
4. Weekly Expenses vs. Budget: Compare weekly spending against the budget to ensure financial prudence.
5. Order Backlog: For businesses that can’t instantly deliver, monitor the number of orders waiting to be fulfilled.

Monthly:

1. Net Profit Margin: Gauge profitability after all expenses have been deducted from sales.
2. Monthly Sales Growth: Compare sales to the previous month and the same month the previous year.
3. Customer Acquisition Cost: Determine the total cost associated with acquiring a new customer.
4. Customer Retention Rate: Understand how many customers continue to do business with you over time.
5. Customer Lifetime Value: Understand how long and what a customer will spend with you. Key for strategies around marketing, segmentation, and customer retention.
6. Return on Advertising Spend (ROAS): Evaluate the effectiveness of advertising campaigns.
7. Inventory Turnover: Assess how often the inventory is sold and restocked.
8. Monthly Overhead Costs: Monitor fixed costs and look for opportunities to reduce expenses.
9. Budget Variance: Compare actual results to the budget to make necessary adjustments in spending or forecasting.
10. Key Product or Service Performance: For businesses with diverse products or services, identify best performers and those lagging.
11. Employee Turnover Rate: Monitor staff retention and understand reasons for departures.

Do you have the systems in place to track and measure these.

Are you able to see how the business is flying at all moments in time?