For your business to be successful, you must get to grips with 3 critical measures: -
- Net profit
- Return on investment
- Cash flow
You must work on improving all 3 simultaneously. To do that, you need to first analyse the numbers for your business in much greater detail - including…
- your breakeven sales analysis
- a detailed analysis of your costs
- the important profitability ratios
- how to manage the 5 elements that make up your net profit,
- an analysis of your cash, other assets, and liabilities
- an analysis of the key activity ratios for your business
Remember that, if you want to make money, you must simultaneously increase your net profit, return on investment, and cash flow. So, these would be good things to start measuring.
But you need to measure much, much more than that. What you should measure depends upon your strategy - and your strategy needs to be designed based upon what's important to your customers so that your strategy meets their needs.
When you have systems in place to measure the key drivers of your business, you can start to manage them and grow your business.
