Acquirers like metrics and ratios and the more data you can provide a potential buyer, the more comfortable they will get with the idea of buying your business. Better than the blunt measuring stick of an aggregate number, a ratio expresses the relationship between two numbers, which gives them their power.
Here’s a short list of 4 metrics to start tracking in your business now:
1. Revenue per employee
Payroll is the number-one expense of most businesses, which explains why maximizing your revenue per employee can translate quickly to the bottom line. In a 2010 report, Business Insider estimated these revenue-per-employee ratios.
- Craigslist: $3,300,000 per employee
- Google: $1,190,000
- Amazon: $1,010,000
- Facebook: $920,000
- eBay: $530,000.
More traditional people-dependent companies may struggle to surpass $100,000 per employee.
2. Ratio of promoters and detractors
Fred Reichheld and his colleagues at Bain & Company and Satmetrix, developed the Net Promoter Score® methodology which is based on a single question that is predictive of both repurchase and referral. Here’s how it works: survey your customers and ask them the question “On a scale of 0 to 10, how likely are you to recommend us to a friend or colleague?” Figure out what percentage of the people surveyed give you a 9 or 10 and label that your ratio of “promoters.” Calculate your ratio of detractors by figuring out the percentage of people surveyed who gave you a 0–6 score. Then calculate your Net Promoter Score by subtracting your percentage of detractors from your percentage of promoters.
The average company in the United States has a Net Promoter Score of between 10 and 15 percent. According to Satmetrix’s 2011 study, the U.S. companies with the highest Net Promoter Score are:
- USAA Banking 87%
- Trader Joe’s 82%
- Wegmans 78%
- USAA Homeowner’s Insurance 78%
- Costco 77%
- USAA Auto Insurance 73%
- Apple 72%
- Publix 72%
- Amazon.com 70%
- Kohl’s 70%
3. Customers per account manager
How many customers do you ask your account managers to manage? Finding a balance can be tricky. Some bankers are forced to juggle more than 400 accounts and therefore do not know each of their customers, whereas some high-end wealth managers may have just 50 clients to stay in contact with. It’s hard to say what the right ratio is because it is so highly dependent on your industry. Slowly increase your ratio of customers per account manager until you see the first signs of deterioration (slowing sales, drop in customer satisfaction). That’s when you know you have probably pushed it a little too far.
4. Prospects to customers
Keep an eye on the efficiency with which you convert prospects – people who have opted in or expressed an interest in what you sell – into customers.
These are just a few diverse metrics of many. The more data you can track and provide, the more valuable business you will have.
