Executives at growing companies can lead their organizations forward with either instinct-based or data-driven decisions.
It’s entirely possible to be successful using instinct, but it depends on luck, and not everyone can be so lucky all the time. Alternatively, everyone can make informed decisions based on data, which can result in consistent growth and success for the entire company.
However, it’s essential that the data quality and clarity is impeccable, and you’re looking at the right metrics. We’ll guide you on the most important data-driven KPIs and how to use them to make better business decisions.
How to use data-driven KPIs?
We at Consero want to advise you to do the following things:
● Build a data room
● Measure and track KPIs
● Apply historical financial data to everyday operations and planning
All of this can maximize the revenue in your company and lower costs at the same time. Furthermore, it will accelerate your success and increase profit margins.
Optimize pricing to maximize revenue and profits
Greater revenue doesn’t always equal higher profits. Many CEOs and CFOs make the mistake of thinking that these two go together.
So, for example, if your company is generating a lot of revenue and is still experiencing cash flow shortages, you’re probably having an issue with pricing. Use our profit margin calculator for a quick benchmark of how your pricing compares to your costs.
Fixing the pricing is not an easy thing to achieve. You have to consider all the costs before you can optimize prices and the structure of pricing. So you don’t lose money on the specific type of transactions, following data-driven metrics will help determine the right amount you need for each product or service.
Secure profitability by managing margins
Your profit margins can reveal your actual profits and not the total revenue. That’s crucial if you’re looking to measure your success.
What you need to do here is track the following things:
● Contribution margin: revenue minus the variable costs
● Your gross profit margin: revenue minus the costs of goods sold
Following these two metrics will finally enable you to gain a clearer understanding of what your profits are, all the while seeing your break-even point.
Use individualized profit and loss statements for revenue stream evaluation
Many businesses usually assume that their biggest client is their best client. Naturally, this translates to any company of any size as there can always be several best clients.
However, it’s wrong to assume this. You need to run profitability reports for all customers because these can often point to your biggest clients as not being as profitable for you as you previously thought.
It often happens because companies focus on providing the best service to their biggest clients, never checking if that’s profitable for them.
That’s why you need to run individual reports to find such low margin clients that are damaging your cash flow.
KPIs can reveal a lot – from single employees to departments and separate product lines, jobs, services, clients, and more – everything within the organization that’s causing you to generate profits or lose money.
