Four Key Steps In Running Your SMB Business Based On Metrics

In News by VendorMach

David Teten of FF Venture Capital summarizes in this article how to run a company based on metrics. In his post, he argues that:

The best CEOs run their companies by their metrics. But for many CEOs, that is not their natural inclination. It means looking at numbers all day instead of people. And it means holding yourself and others rigorously accountable, which can be painful

For those of you CFOs, we summarize with relevant quotes, 4 key points to running a business by metrics

  1. Have a Management Dashboard  Prefer to see a screenshot of an internal dashboard, not something created for the board, and prefer to see that same dashboard in the same format at every meetingIt’s difficult enough to achieve the objectives of running the day to day operations of a business. And as such, easy to forget to measure them. Better to have a master dashboard for your company and a tracking mechanism from day 1. That way you don’t have to create one each time you need it for a presentation or a meeting.
  2. Choose your Numbers Input Wisely  A good metric leads to the answer to one question: “What will I do differently based on this information?”Establish business fundamentals very early on. It’s easy to plug google analytics and track web visitors, and web engagement such as page views, length of sessions, bounce rate, new vs returning visitors. But how does this convert to sales or even operations? For e-commerce businesses that might make sense but for B2B or B2B2C businesses, these are vanity metrics. Ask deep questions about your business. What are the drivers and how does this feed into your projections and ultimately monthly sales and costs. Feed your own dashboard/ or excel spreadsheet as a start. At a minimum, track longitudinal trend of the following: revenue (gross and by month via monthly recurring revenue), sales per FTE, costs (burn), cost of sales (cost to acquire a customer), churn and customer lifetime value
  3. Find Benchmarks within your Industry  A metric is much more valuable once you have established a benchmarkNumbers don’t mean much when they don’t have context. Understand the dynamics in your industry by benchmarking. Benchmarking is more art than science. Refrain from defaulting to generic benchmarking tools ie google and other such tools. If you are in the health care B2B or B2B2C, google will not help you much in benchmarking unless you are interested in vanity metrics. Perhaps the first place to start is internally. If you already have more than two divisions, the best place to start is to compare one division vs another. Another internal example would be to compare metrics by product lines thus you can find your own company benchmark before delving into an industry standard. To establish the industry standard, find niche solutions that cater to your specific industry. There’s always the issue of transparency when it comes to finding reliable sources of external benchmarks. Stay away from solutions that manually collect survey style self reported data for a defined end goal and lean towards those that have automated the process. Lastly, joining an industry advocacy group is always a good idea as they usually will facilitate best practices sharing among members which could include data benchmarking
  4. Practice Makes Perfect  It’s no good having a management dashboard with your dynamic metrics if you can’t share them. Sharing them regularly enables you to explain the story around them and the business trajectory, giving others a glimpse into the business. Keep these 3 parties in mind and the associated objectives in mind when presenting the metrics and its story
      • Your board or advisors:

    To build the case for new financial and operational decisions or changes

      • Your employees:

    To build engagement, driving sales optimization and improving morale

      • Commercial partners:

    To attract new partners or investors by demonstrating the objective manner in which the business is run