You want to measure your business success. What metrics should you use?

Business development is a broad area which need to assess the top line and bottom line metrics through: 1) Revenue streams trend and determine the ups and downs is due to normal conditions like seasonality or there is special events behind. 2) Profit history and key drivers behind to be explaind as it is the fuel for long term sustainability. 3) Cash is the lifeline for any business and without cash business can't continue, so follow up cash indicators is very important. 4) Growth monitoring is critical specially for early stage level business. Adding non financial factors is also important to bring value to business.

Revenue and profit are crucial for any business, but they're just a piece of the puzzle. Here's a breakdown of why other factors matter: Growth Rate: Revenue and profit might be healthy, but are they increasing? A stagnant or declining growth rate could indicate future trouble, even if things look good currently. Customer Retention: Loyal customers are the backbone of any business. High customer churn (loss of customers) can eat away at profits, so measuring customer retention is vital. Cash Flow: Cash flow refers to the movement of money in and out of the business. Even a profitable company can struggle if they can't manage cash flow effectively.

Measuring business success requires a holistic approach that considers various key performance indicators (KPIs) across different aspects of the organization. In my experience in hospitality management consulting, I've found that using a combination of financial and non-financial metrics provides a comprehensive view of business performance. Financial metrics such as revenue growth, profitability margins, and return on investment (ROI) are fundamental in assessing the financial health and success of a business. These metrics help track revenue generation, cost management, and overall financial sustainability.

While revenue and profit are essential metrics, focusing solely on them can overlook key aspects of business performance. Consider incorporating non-financial indicators like customer satisfaction, employee engagement, and social impact into your success evaluation. These metrics offer insights into long-term sustainability, brand reputation, and stakeholder relationships, providing a more holistic view of your business's health and impact. Balancing financial and non-financial metrics ensures a comprehensive understanding of your organization's success beyond traditional profit measures.

To measure business success, focus on key performance indicators (KPIs) tailored to your strategic goals. Revenue growth, profit margins, and return on investment (ROI) provide financial health insights. Customer metrics like satisfaction scores, retention rates, and acquisition costs are crucial for understanding market position. Operational efficiency can be gauged through metrics such as inventory turnover and employee productivity. Lastly, brand strength might be assessed through social media engagement, market share, and brand loyalty indices, ensuring a comprehensive view of success across financial, customer, operational, and brand dimensions.

Sustainable growth rate is key. Ensure your measurement takes into account the shape of your business so that you are set up for long term success. Cutting costs too deeply and not investing in the right places, are areas that you may ultimately compromise the enduring quality and competitiveness of your offerings in the market. Growth and profitability numbers may look good in the short term but a balanced view to the future sustainable success of your business is required.

Growth rate is important from the view point of corporate valuation as its value would be calculated by sum of future cash flow discounted by assumed interest rate minus growth rate which significantly affects the corporate value. In practice as far as the company is growing, you can absorb more fixed costs leasing to creation of cash flow. In addition as the company grows, you can add more talented people who can drive the growth further.

For business success and development, track revenue growth to see if income is increasing, profit margin to understand what's left after expenses, customer acquisition cost to gauge the expense of gaining new customers, customer lifetime value for total expected revenue from a customer, retention rate to check if customers are staying, market share for your portion of industry sales, employee satisfaction to ensure your team is happy, lead conversion rate to measure how many leads become customers, net promoter score to assess if customers would recommend you, and operational efficiency to evaluate how well resources are utilized.

Non-financial metrics play an equally crucial role, especially in the service-oriented hospitality industry. Customer satisfaction scores, Net Promoter Score (NPS), customer retention rates, and online reviews are valuable indicators of customer experience and loyalty. Operational metrics like employee productivity, efficiency ratios, and inventory turnover rates also contribute to assessing operational effectiveness.

One critical area where one can say that his Company is successfull is in gauging Quantum of Repeat orders from a Client or from a Business group. A Company's success is the Trust he builds in a client by repeated delivery of a Quality on time performance and zero Safety incident such clients will not hesitate in giving / engaging such company for larger pie of opportunities in their company.

ALthough a lot of companies believe that the sales numbers are the parameter to measure success (and it is upto a certain extent), I am a believer of the customer retention. The reason for that is simple. When someone is willing to work with you again and again, you're not only re-ringing your cash register but it is also because your service or your product is of the highest qualitly and that is a the reason someone is willing to work with you. This is the parameter that defines successful business because this also a testimony to your work.

Customer retention is crucial for business development for several reasons. Firstly, retaining existing customers is more cost-effective than acquiring new ones. Loyal customers are likely to buy more and try new products. Secondly, satisfied customers can significantly reduce marketing costs through word-of-mouth referrals and improve brand credibility with their testimonials. Lastly, tracking customer retention metrics helps identify improvement areas, enhancing customer experience and driving business growth. Investing in customer retention is, therefore, not just beneficial but essential for a sustainable business.

Retention Rate: Segment your customer base to analyze retention rates for different customer groups. For example, compare retention rates for new customers versus repeat customers or for customers in different demographic segments. Churn Rate: Investigate reasons for churn through surveys, customer interviews, or analysis of customer behavior data. Addressing the root causes of churn can help improve retention rates and customer satisfaction.

Cash Flow is extremely important even if its a trickle. Its much better than having multiple assets with no liquidity, as in properties. Cash flow can be both Active and Passive. Both are needed , especially in the later part of life. However, Passive Cash Flow should be greater than Active, at retirement time, as you have a greater life span; at least till age 80.

Cash flow is reality. Delta cash has direct correlation to dividend payouts and reinvested profits for a firm. Both the factors, add to the benefits of stakeholders of a company.

Cash flow matters. Rest all can be improved by interventions I.e profit or customer retention rate or average ticket size or repeat orders. Higher the cash flow better the opportunities to scale up the business. In my view, Cash flow is one of the parameters to check the product market fit.

Cash flow is the most important metric for any company in any industry, protect your cash flow by all means and your company will have a great chance of succeeding

Impact definitely is a key parameter in gauging a Company's contribution to Industry. Impact in terms of creating value for your services rendered which creates a WOW factor for your Client. Innovative practices in current trends or way of working which will increase productivity, cut down operation costs and at same time be commercially beneficial to both Client and service provider(you) is definitely a point each Company Management must look into.

Embedding ESG as an innovation initiative leverages sustainable practices for competitive advantage. By focusing on environmental sustainability, businesses innovate with greener processes and products, meeting consumer demands and uncovering cost savings. Social innovations, through enhancing diversity and community engagement, unlock new markets and build a motivated workforce. Ethical governance practices strengthen stakeholder trust and open doors to new partnerships. Altogether, ESG-driven innovation fosters long-term growth, resilience, and aligns with global sustainability trends, positioning companies at the forefront of their industries.

While revenue & profits, growth rate, customer retention, & cash flow are measures that clearly define success, they are, in a sense, relatively short-term measures. Rather, I believe a more sustaining measure of success is the degree to which a business can influence & transform for the better the way people live their lives. What happens beyond the walls of the business, out into the local community & into society-at-large is a more lasting measure of success. Thru innovation, a business can create a sustainable legacy and it is this continual ability to discover better ways & create sustainable improvement over time that best defines the overall observable & measureable definition business.

Additionally, strategic partnerships can enhance business success measurement by leveraging partner resources, expertise, and capabilities. Collaborating with industry leaders, technology providers, and market influencers can provide access to advanced analytics tools, market insights, and innovative solutions. These partnerships can help businesses track and analyze performance metrics more effectively, leading to informed decision-making and strategic planning. By combining financial and non-financial metrics and leveraging strategic partnerships, businesses can gain a comprehensive understanding of their success and identify areas for improvement and growth.

FREE CASHFLOW is the ultimate quantitative measurement. In general I like the soft skills into the equation, because often these people score far above the rest into the long term. To achieve that set a long term goal with metrics and work backwards. So a person is not measured on his daily results, but has the time to build up the metrics and combine the quality with the quantitative goals

Happy customers!!! for services businesses at least it’s essential Happy customers have the following benefits for your business - appreciate value = better pricing opportunities and gross profits - refer other business = improved sales - buy more, more often = improved sales - stay longer = improved customer retention - talk about you in positive terms = improve brand recognition and perception - better work environment = happy staff and staff retention Lots of other benefits Get this right and your profits improve As for metrics - NPS is okay as a basic measure - Customer satisfaction surveys assess what your customers really think so you can adapt/improve/address any issues. Remember to ask the key question “would you refer us”

Incremental Annual Recurring Revenue (ARR) is crucial for subscription-based businesses. This metric is vital as it directly reflects the company's ability to grow its customer base and increase revenue over time. By tracking incremental ARR, businesses can assess the effectiveness of their sales and marketing strategies, customer retention efforts, and product offerings. It also provides valuable insights into the scalability and sustainability of the business model, making it a key performance indicator for investors, stakeholders, and company management. Ultimately, incremental ARR serves as a measure of a company's growth trajectory and financial health in the subscription economy.

In today's fast-paced business landscape, the probability of encountering disruptions has significantly increased compared to two decades ago, often occurring instantaneously. Hence, it is imperative for businesses to adopt a flexible model devoid of singular failure points, while simultaneously ensuring adaptability and the delivery of unequivocal value to customers. Furthermore, it is essential to continuously engage in experimentation and remain vigilant of emerging trends and technologies.