“If you’re building or running a business – or even considering setting one up – there are some key performance indicators (or KPIs) that really do set you up for success,” says entrepreneur and business owner James Sinclair. “If you put these to work, you will see the profitability of your business work,” he says.
Watch this performance-focused instalment of our Business Class with James Sinclair video series to discover the three metrics that James recommends all business owners pay attention to.
Three metrics to help grow and nurture your business:
The first metric he explores is labour to turnover ratio, which is so important because, in most companies, the biggest cost will be labour or staff. To approach this KPI, James explains his Goldilocks-inspired approach. “You want it to be just right,” he says, “so that your customers want to keep coming back and your staff are not overworked.”
To help you track this all-important metric on a daily basis, you should calculate your company's labour costs and then use a simple formula to work out your labour cost per unit.
Keep watching as James turns his attention to the areas to focus on when coming up with a successful business strategy. “Use your accountant for long-term planning and tax planning, and be on the numbers yourself with a monthly profit and loss,” says James.
As he points out, working out your profit, loss and margins will help you understand where your business is at and enable you to make smarter business decisions. “And what’s really good about management accounts – as opposed to looking at year-end accounts – is that it allows you to compare periods or months.”
James goes on to acknowledge that, while compiling these kinds of accounts is something big businesses do, it’s also something that small businesses should do – “as it just makes you a better business owner”.
Keep watching as James identifies a third KPI. This metric revolves around average customer spend, something he explores in more detail in this previous Business Masterclass video that introduces the two customers who will transform your business.
Remember, business success is not just about your bottom line, so take the time to understand what metrics you should be tracking for your business and how to use them to drive growth.
Find more of James Sinclair’s Business Class videos here.