Big Red Car here keeping score on YOU!
KPIs, talking key performance indicators. Scorecards.
I thought I had written about this subject, but I cannot find it. Must be getting a little spacey, the Big Red Car.
So, today, I want to run through quickly a couple of key performance indicators you should be keeping track of at your company.
KPI me, Big Red Car
OK, dear CEO, here is a quick look at some financial and general KPIs.
Gross Profit Margin as a percentage – gross revenue minus cost of goods sold
Net Profit Margin as a percentage – gross revenue minus cost of goods sold,. operating expenses, interest, and taxes
Monthly Recurring Revenue
Return on Equity as a percentage – this is more for companies which are up and running rather than a startup
Current Ratio – current assets divided by current liabilities
Monthly Overhead Rate
Fixed v Variable Costs
Monthly Burn Rate – how much money are you losing per month
Runway – at the above monthly burn rate how many months can you survive?
Revenue per FTE
Revenue per Customer
Growth Rate of Revenue – look at this on a monthly, quarterly, and annual basis
Inventory Conversion Cycle – how long does it take to convert your inventory into cash. This one is often overlooked.
Asset Turnover Ratio – the ratio between sales and average total assets, a measure of sales generation
Customer Acquisition Cost – expense to get that customer
Long Term Value of a Custom – expected revenue over the life of the relationship assuming a single CAC
LTV to CAC
CAC Recovery Time – how long does it take to recover the cost of acquiring a customer?
Monthly Active Users
This is a snapshot, not a comprehensive list, but a great company could exist using these for several years.
How do I KPI, Big Red Car?
First, calculate all these data points.
Second, chart them on a monthly basis.
Third, study the trend. Make the trend your friend. Do not ignore the trend.
That’s all there is to it, beloved CEO. Just start there.