?? What's the GOAT of All Business Metrics? Hint: It's Not Just About Revenue ??

Is there a single metric that can instantly tell you how well a business is performing? Many would argue it depends on a multitude of factors, but let's focus on one standout indicator: Return on Capital (ROC).

Now, you might think, "ROC is useless if my business isn’t currently profitable." However, let's challenge that notion. ROC helps paint the ideal picture of your business’s financial health. It measures the gross profit from each client, anticipates customer growth, and factors in overheads to project future profitability based on current operations.

Sure, the calculation might sound daunting, but it's quite straightforward with a robust financial model. Once you've got your ROC, what's considered a good rate? Is 15% decent, or is 50% outstanding? Well, it all hinges on your cost of capital (COC). Simply put, your ROC should outperform your COC to truly shine.

But here’s a Hurdle: large investment programs can skew your perceived profitability. These costs might pass through your profit and loss statements unnoticed in the short term, yet they consume capital that could otherwise be deemed profitable. It’s crucial to adjust your ROC to reflect these investments, aiming for a 'target ROC' post-investment or a 'normalized ROC' that excludes these capital expenditures.

ROC isn't just a number—it's a comprehensive snapshot of your business's financial efficiency over time. Aim high, and keep refining your strategy to maintain a ROC that outpaces your COC.