Indicators are used to measure and evaluate different aspects of the business. It is important for each company to define its objectives and evaluate what needs to be measured.
A good tip for a small business is to have few goals and few indicators. 4 or 5 are fine: How do I measure what I want to achieve?
Below is a list of indicators that could be useful for small businesses.
Financial indicators
1. Annual sales ($). It's simple, just add up everything that was sold in the year.
2. Sales growth ($). That is, this year's sales minus last year's sales.
3. Sales growth (%). That is (this year's sales)/(last year's sales) -1.
4. EBITDA ($). Comes from the English “ Earnings Before Interest, Tax, Depreciation and Amortization” . In Spanish it would be profit before taxes, interests, depreciation and amortization. Why evaluate this profit, if it is not really the profit that remains for the entrepreneur? The beauty of this profit indicator is that it depends on the performance of the business operations themselves, and is not contaminated by financial factors outside of day-to-day operations (such as interest and depreciation).
5. EBITDA margin (%). It is the EBITDA/Sales -1. It is interpreted as “how much money is left in the business for each peso sold”.
6. Growth in profit (%). (EBITDA this year)/(EBITDA last year) – 1.
7. ROE. It comes from the English “ Return on Equity ”. In Spanish it would be the return on equity. It is measured as Utility / Equity. For example, an entrepreneur whose business is a store, surely made a significant investment in the premises. It can be interpreted as how many pesos the entrepreneur earned for each peso invested. A good business is expected to earn more money than it would earn by assuming less risk, for example, by putting that money into a mutual fund or APV.
8. Debt Equity Ratio. It is calculated as (liabilities) / (equity). This indicator is quickly obtained by looking at the balance sheet of the business. Be careful, having this indicator high can be a good sign. In fact, in the business world we talk about the “capacity to get into debt”, since large companies try to work more with other people’s money (debt) than with their own. However, for this it is important to distinguish good debt from bad debt. For a debt to be good you must be sure that you will be able to pay it, and in addition, it must be invested in something that gives you more money than what you lose with interest. On the other hand, bad debt can cause significant damage to your business if you cannot pay it. Typically that is when companies go bankrupt.
Customers, Marketing and Sales
9. Net Promoter Score. This is the rate of promoters minus the rate of detractors. You can phone number in philippines find the details of the calculation here.
10. Repurchase (%). Of the customers who bought from you, how many bought again later? A good repurchase rate gives an indication of satisfied customers. It is calculated as [(number of customers at the end of the period) – (number of new customers acquired during the period)] / (number of customers at the beginning of the period).
11. Conversion rate (%). This is the indicator that tells us the percentage of people who performed an action. For example, of those who entered a landing page, how many left their email? Of those who visited the sales page, how many bought a product? It is calculated as (number of people who performed the action) / (total number of people to be evaluated).
12. Open rate (%). Similar to the conversion rate, but applied to your company's mailings. Of those who received an email from your company, how many opened it? (number of people who opened the email) / (total number of people to whom the email was sent).
13. Average ticket. On average, how much do our customers spend? It is measured as (sales for the period) / (quantity of sales for said period).
14. Website visits (#). Number of people who visit the website per month.
15. Social media followers. Number of followers. Consider the social networks your business has, and compare it with your competitors. Also check how this number and that of your competitors are evolving.
Operations
16. Cycle time. Time taken to manufacture a product. This has several implications for the business, for example, on inventories.
17. On-time delivery rate (%) . Indicates how many deliveries are made on time and successfully. It is calculated as (number of complete and on-time deliveries) / (total number of deliveries).
18. “Lead Time”: It is the time that passes between when a customer places an order and when they receive it.
People
19. Staff turnover. It tells us how quickly people leave the business. High staff turnover is a sign that talent is leaving the company. Consider that selecting and training new people costs time and money, and it is also normal for people to have a learning curve before performing at 100%. Staff turnover is calculated as (number of people leaving the company) / [(number of people at the beginning of the period + number of people at the end of the period) / 2].