4 Measures of Financial Success for Your Company
Success can mean different things to different people. Financial stability, public acclaim, a sense of inner peace, can all be measures of success. But when it comes to the financial health and success of your company, there are certain measures that are universal.
Here are four important measures of financial success you should be measuring in your company.
TOPLINE REVENUE
“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” – Charles Darwin.
When you receive your income statement, you’ll be seeing a snapshot of how your business performed over a certain period of time, with a comparison of top-line and bottom-line revenue (When we speak about topline revenue, we’re talking about gross sales.) By comparing your top-line revenue numbers from year to year, you can assess how the company grows and shrinks in response to different conditions.
However, while top-line revenue gives you a good general picture, it does not tell the whole story. You cannot see how effectively revenue is being managed, or whether the company is structured to produce optimal bottom-line results. While increasing top-line revenue should be part of your business plan, strategically it should not be your only focus.
A company in good financial health will be constantly reviewing their top line revenue to find trends and areas for improvement.
PROFITABILITY
The truth is, too many companies focus on revenue as a measure of success. While measuring revenue certainly offers some value, it is by understanding profitability that you can get a grasp on how successfully you are meeting market demands. Without profitability, your company cannot survive in the long run.
You may be surprised to learn your largest clients or markets are among your least profitable. When considering ways to increase profitability to improve financial success, it can be beneficial to look at profitability not just across the whole business, but across different verticals or market segments. You may discover trends you can capitalise on, such as an underserved market.
A company in good financial health will be constantly reviewing their profitability and processes to find areas for improvement – creating a lean, efficient process to eliminate unnecessary expense.
STAFF ENGAGEMENT
When we consider staff engagement as a measure of financial success, we’re not talking about Friday night drinks or feedback loops. Instead, we want leaders to think about identifying the specific actions employees can take to help the company achieve its governing objectives.
With a strategic plan in place and actively being pursued, the next step is aligning roles and competencies to these objectives. Customer satisfaction surveys, statistical data and customer behaviour studies can further enhance your strategies with data. Employees need to see predictable, persistent goals and understand their role in reaching them, and being able to bring a data-backed strategy to your team will help ensure high engagement.
A company in good financial health will be maintaining and tracking KPIs across their teams to see how each department is tracking against strategic goals.
CUSTOMER/CLIENT LOYALTY
How loyal are your clients? Do they stick with you through thick and thin because they love your product, or will they desert you at the first sign of a shiny new gadget or a cheaper price tag?
Client loyalty isn’t as common a measure of financial success as we believe it should be. After all, it’s no good having a profitable business with low loyalty as profits could be eroded as soon as customers move on to something new or cheaper. On the flipside, breeding a strong culture of loyalty acts as a buffer against leaner times. Customers are more likely to return to companies they know and trust, even when they aren’t the cheapest on the market. A loyal customer base enables you to price for value, instead of competing for the bottom of the market.
A company in good financial health will be creating a winning customer experience and focusing on improving lead conversion, frequency of purchase, and average dollar sale.
By looking at these four factors in unison, you can gain a complete picture of your company’s financial state. What could you improve upon or consolidate in the coming months? How will improving your strategic approach impact your bottom-line? How are you measuring financial success at your company? Are you prepared for a closing market?
For more information, read our free guide, Success Strategies for Growing Smart Companies.
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