Seasoned sellers appreciate that customers may measure business performance any number of ways. They also invest time to employ the most favorable metrics on individual accounts or deals. Here are 7 approaches that illustrate the breadth of this critical function:
1. Bottom line, top line.
Many people believe business performance is all about the bottom line. In contrast, seasoned executives and business analysts start with the top line. Why? Because they know it’s always harder to grow revenue than cut costs, and that revenue trends best portend future business health.
One of the best ways to put business performance measures in context – good, bad or ugly – is by employing comparative benchmarks. For example, performance relative to an industry peer group, or relative to a company’s historical performance.
3. Industry-specific metrics.
Each industry uses a common set of metrics to manage their business. Such metrics can be found within analyst reports. For example, Retailers monitor sales per square foot or comparable store sales, whereas Service Providers like AT&T or Comcast will focus on metrics like average revenue per user (ARPU).
4. Company or customer specific.
Individual companies employ all manner of homegrown measures to compete and differentiate themselves in the market. For example, a technology equipment provider may track the amount of time it takes a customer to install or implement their product.
5. Hard vs. soft metrics.
When estimating ROI, hard metrics, those that can be objectively measured such as total revenue or return rates, are almost always more powerful then soft metrics. This is because the latter, such as employee morale or brand reputation, are subject to subjective influence and bias.
Measuring business performance at any given point in time is useful, but measuring performance over longer periods is where real insights are gained. For example, changes in gross margin over several periods can serve as a key leading indicator to effectively signal future opportunities.
7. By role.
It’s important to recognize that different roles within an organization, or different target contacts within a customer, will track different metrics on their dashboards. Whereas CFOs closely watch cost of capital and cash flow, in contrast CIOs may focus on a metric such as speed to integrate acquisitions.