Tag Archives: Patterns

How Do You Establish Performance Metrics? Three Guidelines

Situation: A CEO wants to establish baseline metrics to evaluate company performance, and guide both planning and operations. Without baseline metrics it is difficult to compare the impact of options that the company faces. What are the most important areas to analyze, and what do other companies measure? How do you establish performance metrics?

Advice from the CEOs:

  • Start with the basic divisions of the business. As an example, take a company which has three arms to its business – products that it represents for other companies, products that it distributes, and custom products that it manufactures to customer specifications.  
    • For each of these lines track gross revenue, profit net of direct costs, FTEs necessary to support the business, number of customers, net profit percent, net profit per employee and net profit per customer.
    • Calculate these metrics on at least a quarterly basis for the past 2-3 years to set a baseline and a chart of historic trends.
  • Once you establish a baseline, chart current performance on at least a quarterly basis and look for trends and patterns.
    • Where is your greatest growth and greatest profitability – not just on a global basis but in terms of profit per customer and profit per employee?
    • If you’ve included your full costs including the costs of the FTEs to support each business, then the analysis should show you where you want to invest and what it will cost you to support additional investment.
    • Do a similar analysis of costs per line to further support investment analysis.
  • This analysis will help to evaluate whether it is better to purchase another rep line, or whether you would be better off investing the same funds to grow custom business.
    • Similarly, it will demonstrate on what kinds of customers and products you want your sales force to focus to grow profitable business and will help you to establish objectives based on anticipated revenue or profit per new customer that sales closes.
    • Finally, it will highlight potential vulnerabilities such as the impact of the loss of a key customer in one portion of the business.

How Do You Manage Opportunities in This Economy? Five Ways

Interview with Keith Merron, CEO, Avista Consulting Group

Situation: Ongoing uncertainty makes it difficult to clarify strategies going forward. What are the bases for these uncertainties and how do you manage opportunities in this economy?

Advice:

  • The world is moving so rapidly that they key to success is differentiation. There is so much information about how to do this that companies start to look similar very quickly. The ability to stand out as different is critical. Ask yourself:
    • What is my target market?
    • What are the needs that my offer will satisfy?
    • What is my unique approach that is distinct from other solutions which meet these needs?
    • Once you identify the answers, you need to back these up.
  • One has the opportunity to write the future. If you can get one step ahead of the curve this is a huge advantage.
    • Products that died were often two steps ahead.
    • Successful visionaries see patterns that are emerging, sense what is next, and speak to that.
  • Because information is at your fingertips through the Internet anyone can set up a business. The Challenges are viability and sustainability. If these are present the opportunities are huge.
    • The web is a place where you can share information. How to monetize this is unclear.
    • Once you have a following you can offer things for sale that are valued by your following. When this happens, the potential for fast growth is more available than ever. So is the flip side. If a restaurant gets trashed on Yelp this can kill it!
  • In a recession, M&A activity is faster. This enables one to establish a presence much more easily.
    • There are many virtual companies. You no longer have to be in the same place to work together! There are also many ways to partner or co-brand via the Internet.
    • What’s hard is to create tensile strength in the relationship. Because it is so quick and easy to cobble together relationships, the biggest challenges are creating loyalty and commitment.
    • The needs are communications, motivation, commitment and follow-through – just like in a traditional company but in a virtual space. This creates a true bond.

You can contact Keith Merron at keithmerron@comcast.net

Key Words: Uncertainty, Opportunity, Differentiation, Target, Market, Needs, Approach, Timing, Patterns, Visionary, Internet, Following, Community, M&A