Check your business’s vital signs! This is the second article in the series A CEO’s Guide to a Healthy Business.
If you go to the doctor’s office for an annual wellness visit, you know the first thing they do is check your vitals. Vital signs are basic measurements of your body’s physiological functioning. Clinical evaluation starts by recording your temperature, heart rate, respiratory rate, blood pressure, and oxygen saturation.
“By monitoring a person’s vital signs consistently, such as at every health checkup, a doctor can establish a baseline for that person. Vital signs can then act as early warning flags. For example, a change in a person’s baseline measurements might point to an underlying illness or heart issue that has not yet been diagnosed.”
Vital signs are indicators of health, sort of like a car’s dashboard. You can see what’s working properly and what needs attention based on the indicators.
Wouldn’t it be great if you could give your business this same sort of wellness check each year?
Then you wouldn’t have to guess if your business is healthy or in need of urgent care! So many CEOs and business owners find themselves guessing because they are living in a knowledge gap. They may have some information to give a partial picture. Or they may have the full picture with no idea how to grasp the meaning.
And it’s not just small businesses or young startup operations in the knowledge gap. We’ve worked with many companies with annual revenue of $10M to $15M that weren’t conducting wellness checks for their businesses. But whatever the size of your business, one thing is for certain:
CEOs and business owners can’t afford to live in the knowledge gap.
It’s essential to know what’s happening in your business and why so you can make the right decisions moving forward.
While there’s no simple way to take your business’s temperature or heart rate per se, there are standard indicators that provide insight into the relative health and vitality of your company.
TAKE YOUR BUSINESS VITALS
One way to conduct an annual wellness check for your business is to set and track Key Performance Indicators (KPIs). Unlike the vital signs for physical well-being, KPIs are unique metrics for your business, often influenced by the industry you operate in,
“To set your own KPIs, you need to know both how your strategy creates value and what that value is,” said Kyle J. Brost, CEO of Spark Insight Partners. “Once you’ve defined … the unique or key activities you will perform, you can start setting your own KPIs by making those activities measurable, and then measuring them.”
Source: Business News Daily
Common business vitals you might want to track include:
- Financial KPIs: overall revenue, average revenue per customer, recurring revenue rates, cost of goods sold, etc.
- Service Delivery KPIs: availability, service level agreements, delivery timelines, etc.
- Sales KPIs: sales leads, average close rate, retention rate, new customer growth, etc.
- Customer Satisfaction KPIs: brand perception, referral rate, etc.
Setting the KPIs for your business is the first step; but those change from year to year, and even quarter to quarter! Be sure to review your KPIs each month and update them as needed. Whatever your KPIs, you’ll need to track your actual performance against these goals. It’s the equivalent of your doctor recording your vitals at the annual wellness visit: year after year, how is your business performing on each KPI? Any changes in measurements alert you to areas that need special attention.
CLOSE YOUR KNOWLEDGE GAP
Are you in the knowledge gap? There’s no reason why you have to stay there. You can start measuring and tracking your business’s vital signs today. If you’re ready to improve your company’s well-being and need help defining and tracking your financial metrics, the Officeheads team is ready to help!
We come alongside CEOs and business owners like you to make sure your entire company is in tip-top shape, using our signature 5-gear financial management approach. Get in touch with us today to see how the team at Officeheads can lead your company into a healthy 2023 and beyond!