Top 5 KPIs Every Start Up NEEDS To Track | John Briggs, Incite Tax

What are the best KPIs to track if I'm just starting my business? So in the beginning, when you're starting your business, it's super important that you are in love with cash flow. Everything you do has got to be cash flow. So important metrics to think about is looking at your cash balance at the same date every month. The reason you do this is so that there's consistency. So let's say I'm gonna look at my cash balance on the 20th of every month. So I would have— I would track that, right? Is it increasing from the 20th of the previous month to the 20th of this month? If I'm not consistent on the date that I'm tracking, I will get bad data because my cash balance is really high, for example, before I pay payroll. But then I pay payroll and cash balance goes down. So you want to make sure you have the same date that you're tracking, but just the cash balance alone is really important because you want to make sure that that's growing as a startup. Profit per product or customer is another one. It is super critical that if you're going to take on work as a startup that you're not discounting services just to have the work to do. You want to make sure that you're making margin on every delivery that you do, whether that's a physical product or the service delivery. You want to track that, and profit per customer or per product is simply the revenue that you get, and then you subtract all your expenses that went into delivering that. So as a service-based company, labor is going to be a a big component of that, maybe the only component of that. Products, the physical material that you buy, is going to be an expense. You're likely marketing because you've got to get the word out that you're a new business. So it's really critical that you're following return on marketing or ROI on your advertising, whatever you want to call it. It's the idea of tracking what money Did I put into this marketing effort and how much new business did I get off of it? A lot of clients can put themselves bankrupt and go out of business before they basically start because they spent so much money upfront with the free offer or the loss leader in order to then earn money on the backend, but they stopped tracking, so they don't actually know if they're making money on the backend. Also, if you do plan on doing a loss leader scenario, you better make sure that your numbers are in check and that you know how much runway you have of cash balance that you've invested or borrowed before you run out of money. So again, keep track of, I spent this much money on marketing, so if I have a loss leader, all the costs that go into that loss leader would be something that I'm tracking, and then how much revenue did I get in return from investing in the loss leader or whatever other things. But also don't discount your time. I know when I first started my business, I didn't spend very much money on marketing, but I spent a lot of hours networking and doing things like that. And not all networking is created equal. I actually have a little bit of PTSD over it since I've done so much of it earlier in my career. And thankfully we've figured out more efficient ways. I'm not discounting networking. There's some people out there that are amazing at it and really great connectors. I'm just not one of those people. And so I found other ways that are more efficient for me, but tracking my time that I put into the marketing is also a critical component that you want to track if you're a startup. Because there may be a better use of your time depending on how much revenue you're getting from those efforts. So track both money and time. It's also important to track your break-even. This is you looking at all your expenses, and then the break-even point is, do I have enough revenue this month? Does it equal at least what I spent On everything. That's my break-even point, the point where you're now zero. So it's a net zero. You're not losing money, but you didn't make any money. You want to know what that point is. It is going to fluctuate month over month, so you do want to track it month over month. And you always want to make sure that you're above break-even because that's how we grow. And then the last thought I have So I'm a big fan of being diligent with your expenses because as companies grow, expenses often increase at a faster pace than your income. So we want boundaries that help us control the expenses. So I talk about in my book, Profit First for Microgyms, but this concept relates to all businesses. Is the expense productive for my business or is it unproductive? And then Keith Cunningham is a great business author, thinker, coach. I recommend looking at his stuff. For the productive expenses, I like the way he simplified it. So is this expense helping me add customers or helping me retain customers? Every expense that you take on as a startup, you You better be able to say yes to one of those 2 questions. And if you can't, don't spend the money. On top of that, it's also something as a startup that you're gonna wanna revisit that expense every single month because we can have ideas and we can see how we could make money off of an expense. But sometimes life happens, other priorities get in the way. And then all of a sudden what we could have made money on is now just this ongoing expense, but we're not giving it the time and attention that we initially thought we could when we took it on. So review those expenses regularly. Like just, I don't know what the right word is right now. It's not coming to me, but diligently. There's a better word, but sorry, but I'm at a loss. Diligently, just, you wanna do that so that you don't keep an expense that isn't productive ongoing. Now, a follow-up question to this is, are these KPIs different if I'm trying to grow an existing business? And the truth is no. The reason being, if I'm a startup, my goal is to grow. So in my mind, these 5 things that I've talked about are super critical in tracking when it comes to your growth. If I'm taking an existing business and I'm wanting to grow, still the same thing, right? Because if we don't have, if we're not tracking these types of metrics, it's easy for us to think arbitrarily that things are going well. But in reality, it's more, even more dangerous with a, existing businesses because you have some existing profits that might help you float through bad decisions if you're trying to grow. I had a client once, big name dropper, kind of one of those people when you meet them, you realize this person is completely insincere, but loved getting his name out there, having people vote for him to be a high entrepreneur on Rewards. You get the type, right? He added— he's very confident in his marketing ability, and he added almost 3 times the amount of employees because he knew in order to grow, he had to have the staff to do that. So he added the expense, and guess what? His service wasn't actually that good. I know because I used it firsthand, and other of his clients realized it wasn't that good either. So he wasn't retaining his customers. His marketing didn't prove out to be as well as he wanted. And within like a 3-month period, the little bit of margin he had earned in getting to a certain point, he wiped it all out because he made bad decisions on how to grow. Also, obviously, having a quality product is really important when you're trying to grow. So reorders or retention of customers is a really good thing to look at always. Anyway, so whether you're startup and you're trying to grow from a startup or you're existing business and you're trying to grow, cash balance, product per customer, or sorry, profit per product or customer, your return on marketing money and time, the return on both. Am I at least hitting my break-even point every month? And then are these expenses helping me add customers or retain customers? Those are metrics in any period of growth that I would be focusing on. Remember, profit is a choice. Have the courage and wisdom to choose it.