Every business has its make or break financial assumptions.  Also known as Key Performance Indicators (KPIs), these do-or-die figures are the drivers of your business.  A web company’s KPIs might include the conversion rate (number of visitors who convert into customers) and average time spent on the site.  A restaurant business might focus on the time it takes to turn a table, or the average ticket size.  As your company grows, your financial drivers will determine your success.  Neglecting them will result in lost potential, or worse.

Drivers vary by industry.  If you’re not sure what your KPIs are, start by looking at industry reports.  Read the 10-Ks of public companies in your industry and pay attention to what its managers focus on.  Another great way to determine which indicators will most impact your business is with your financial model.  Analyze the sensitivity of your inputs by testing each at different levels.  The inputs that drastically affect your revenue or profit are likely your KPIs.  Once you figure out you KPIs, make sure you know your numbers cold.

Matt Sand

Author Matt Sand

Passionate about making a difference through innovation and entrepreneurship.

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