New Venture Lab: Equipping Christian Entrepreneurs

Question

What are some of the key metrics to measure for a new small business?

Answer

Probably the most critical thing to measure and monitor closely is your sales pipline such as:

• What are your lead sources?
• How effective are your lead sources?
• What is the cost per leadt?
• What is the "friction" of your sales pipeline from the lead stage all the way through to closing the sale?, e.g. how many leads turn into prospects and how many prospects turn into proposals, etc.
• What is the "flow rate" of your sales pipeline?, e.g. how many new sales are required each month to break-even
• What is the velocity of your sales pipeline?, e.g. how long does it take for a lead to work its way through your sales pipeline from start to finish?

Next, I would suggest measuring and monitoring your cash flow and your cash cycle such as:

• What are the sources and uses of cash?
• What is the typical timing of cash-based expenses?
• When do you collect from customers?
• How much time elapses between when you experience the cost of your goods or services vs. when you collect for them?
• How much cash is on hand?
• What is the current "burn rate"?
• When is the expected cash flow breakeven date?
• When is the expected "fume date"?

Thirdly, I would suggest measuring and monitoring your profitability such as:

• What is the fully-loaded cost of each type of customer?
• What is the margin on each type of product or service?
• What is the overhead expense run-rate?
• What is the variable cost on each type of product or service?
• What is the overall business model in terms of how the business scales?
• When is net income break-even expected?
• What is the overall profitabilty of the company?
• How is that expected to change at different levels of sales according to your business model and plan?
• How are you performing vs. your plan?