A company has a good accounting system, but the CEO is concerned that they are
not making the best use of metrics to drive the business. He senses a lack of
shared understanding of key metrics and goals. He senses the appearance of
financial disarray, despite his clear grasp of the business. Do you have
control of the numbers?
from the CEOs:
A good accounting system may be in place, but if it is not being used to drive the business and monitor the achievement of milestones then the company is not gaining the best advantage from it.
If there is a sense of financial disarray, this suggests that the company lacks financial metrics. Employees and managers may be doing their jobs, but without financial metrics it is difficult to tell how well they are doing their jobs.
Start with basic metrics:
Where are sales coming from?
What is the profitability of sales by customer segment and product line?
What is the company’s profitability?
What are the profitability trends of the company and key segments of the business?
Once a company is tracking these metrics, it is easier to focus managers and employees on products, product development, operations, sales and marketing issues that are most essential to the company’s success.
The company needs the equivalent of a CFO. This means a financial person, not an accountant. An individual who knows how to look at the numbers. A CFO will help the company to
See the strategic trends in the business,
Uncover the best opportunities for growth, and
Understand the greatest potential threats to growth of the business.
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.
Situation: A company is actively marketing to prospective clients and also engages in networking. They want to assure that they are up to speed with current trends in marketing. What are best practices for following up on marketing or networking contacts? How do you best leverage networking?
Advice from the CEOs:
Timing is everything. A prospective client may or may not have an immediate need for your product or service, but may develop a need in the future. Assure that you have a program that provides ongoing follow up via:
Regular personal follow up
Initial follow up should be rapid. Ask for permission to follow-up and set the time frame when you meet a new prospective client. Ask how the prospect prefers for you to stay in touch. Do they prefer newsletters follow-up via social media, or personal follow-up?
Draft letter, email and social media communication templates ahead of time so that rapid follow-up is easy.
Use an electronic or print newsletter to stay in touch with prospects. Social media have become an increasingly important way to stay in touch with networking contacts.
Basic newsletters are usually 2-3 pages, or a one pager with links to see full articles.
Look at contact management software: for example Salesforce.com or ACT.
Basic sales and marketing subscriptions from Salesforce.com start at $25/user/mo. for up to 5 users, or $65/user/mo. for a complete customer relations management (CRM) system.
Quality of collateral is important. It is a face of your company. High quality collateral should have a consistent look and feel, and should remind the prospect why they were interested in you and your company in the first place.