Have you seen the commercial with the two guys in the gym doing bicep curls and one bro bulks up with every rep? How about the cowboy with the ever-increasing belt buckle? The message is, “Switch to our service and you’ll get more.”
How about getting more for your business? I’m not talking about changing your insurance carrier either. I’m talking about what really matters to an owner – more of the bottom line, more profit, more cash, and more for you. The number-one way to achieve this is with metrics and measures that communicate the health of your business.
We know that what gets measured gets managed. So here are three things to pay attention to:
1. Gross profit
This is the net after subtracting the cost of delivering the product or service to your customer. It’s used to fund overheads and capital improvements. The higher it is, the larger the bottom line, unless you spend out the wazoo. It’s critical to measure it by product, by customer, or at another granular level that really drives your business. You can adjust your decisions on pricing or marketing expenditures if you’re not making as much as you like, or you’re not getting an ROI on your marketing that you’re targeting to increase your gross profit.
2. Average invoice value or average sell price
This represents the average revenue per customer transaction. This number is especially valuable when looked at over time to understand competitive pressures on your pricing, changing consumer preferences, or economic factors combined with your gross profit analysis. By arming yourself with this, you can plan price changes that will improve both metrics.
3. Your cash runway
This is how many months of cash you have on hand given your average monthly expenditure level. This metric is especially important for startups, companies with cyclical sales, and businesses that have hit a sales plateau or whose sales are declining. Knowing how far your cash balance will take you gives you confidence in your business decision making.
So, when you’re paying attention to your numbers and are intentional about managing your business, like a certain client of mine, you can achieve an extra comma in your net income. Now that’s what I call ‘more!’
When you’re ready to get more for your business, give me a call.