Five Key Numbers You Should Know About

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Five Numbers You Should Know About In Your Business.

The BizMetrics Marketing Minute
Volume 6, Issue 9.

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Let’s take a look back at last year’s results and five key numbers you may want to discover about your business’s performance.  To start, grab your 2016 income statement, or better yet, give us a call to help you compute and interpret your results. Now is the time to make sure this year’s results will be better based on past information gained.

 

Revenue per Employee 

This number measures a company’s productivity with regard to its employees and is relevant and meaningful for all industries.  If you have part-time employees, compute a full time equivalent total and use that as your denominator. Compare this number to prior years to see if your company is getting more or less productive.  Also compare this number to businesses in your same industry to see how your company compares to peer companies. You may also want to compute other revenue calculations, such as revenue by geography, revenue by product line, or average sale: revenue by customer, if you feel these may be meaningful to your business.

 

Customer Acquisition Cost

How much does it cost your business to acquire a new customer?  That is the customer acquisition cost and is made up of marketing and selling costs, including marketing and selling labor.  You’ll need the number of new customers acquired during 2016 in order to calculate this number. Compare this number to prior years as well as industry peers.  You can potentially do a lot to lower this number by boosting your marketing skills and implementing lower cost marketing channels.

 

Overhead Costs

Overhead costs are costs that are not directly attributable to producing or selling your products and services.  They include items such as rent, telephone, insurance, legal expenses, and executive salaries.  Although it’s not standard practice to break out overhead expenses from other expenses on an income statement, it’s valuable to know the numbers for performance purposes. Compare your overhead costs to prior years and industry averages.  You can actively manage your overhead cost by re-negotiating with vendors on a regular basis and trimming where it makes sense.

 

Profit Margins

Your profit margin can help you determine which division of your business is most profitable.  If you sell more than one product or service, you can compute a gross or net margin by product or service.  You can also compute margins by geography, sales rep, employee, customer, or any other meaningful segment of your business. Your accounting system may be able to generate an income statement by division if everything has been coded correctly and overhead has been allocated appropriately.  Reach out if you’d like us to help you with this. Seeing which service or product is most profitable can help you decide if you want to try to refocus marketing efforts, change prices, discontinue items, fire employees, attract a different type of customer, or any number of other important decisions for your business.

 

Breakeven Point

Do you know how many units you need to sell in order to start generating a profit?  If not, the breakeven calculation can help you learn this information.  The formula is Fixed Costs / (Sales Price per Unit – Variable Costs per Unit) which results in the number of units you need to sell in order to “break even” or cover your overhead costs. The breakeven point helps you plan the amount of volume you need in order to ensure that you have healthy profits and plenty of cash flow in your business.

 

These numbers can help you interpret your business performance on a deeper level allowing you to make better decisions that will lead to increased success in your business.  If we can help with any of them, please give us a call any time at 1 844 577 7654 or at solutions@bizmetrics.ca  Please keep your feedback and suggestions for our blogs and newsletters coming.

 

BizMetrics and Results You Can Count On are trademarks of BizMetrics Incorporated. Copyright © 2017 BizMetrics Incorporated. All rights reserved.

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By | 2017-08-09T15:40:38+00:00 July 25th, 2017|Categories: Audio, Finance, Latest Articles|Tags: , , |

About the Author:

Stephan is a dynamic marketing leader, speaker and author. He brings a deep understanding of the challenges facing Small Business today. Prior to founding BizMetrics, he has held senior marketing and business development roles with Sony, Wolters Kluwer, FujiFilm as well as Professional Firms in both B2B and B2C spaces, leading teams in high pressure and challenging environments. Stephan is a highly motivated, detailed professional who excels at developing business from the ground floor up. Consistent in driving innovative, cost effective business growth & marketing strategies, he is known for establishing a solid rapport with customers by creating an atmosphere of trust and respect in all relationships. Stephan holds a specialist BA in Economics, Commerce and Political Science from University of Toronto.

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