"Businesses are separate legal entities". When most entrepreneurs hear this, they don't think beyond "...yes, my business can sue or be sued" however, there is more to the statement than meets the eye. Having looked deeply into it, I have uncovered something even more powerful.
Every human being is born with a survival instinct. We do not need to be lectured on the need to breathe, eat, or create value to get money, these things are found out almost naturally. To continue to exist and live well, we need to make sure we breathe, eat, and create value.
In the same vein, businesses (as intangible persons) also needs to survive by making sure that it breathes, eats, and create value. These three components are vital to business survival and growth so every entrepreneur must pay close attention to it. So what does a business breathe, what does a business eat, and how does it create value? What are those metrics you need to monitor to ensure your business doesn't die? Here.
1. CASH-FLOW: Cash is king, and even more importantly, cash is air. If you have a startup or you run a business, you will agree that everything revolves around cash; thus it is referred to as the air of the business. With enough cash, the business lives, with no cash, it dies.
Because cash-flow is so important, the first metric every entrepreneur must monitor closely is the cash-burn rate. The cash burn rate tells you how long before your business will run out of cash. It details how much cash you have available, the biggest bills you must pay and when the payments are due.
If you have more than a year's worth of cash in the till, you are in good shape. If you have between eleven months and three months before you run out, you should be getting nervous. And if there's less than three months, you have a cash crisis that will require a big financial infusion, huge layoff, or an orderly shutdown.
2. CUSTOMER BASE: Every business feeds on (or off) its customers, and every customer is important. No matter the industry, every business is designed to sell something to certain people. So if there is no one (or too few) to sell to, such businesses are on the highway to demise. It is therefore highly important for businesses to track the growth of their business through the Customer-growth monitor.
The customer-growth monitor tracks the growth rate in number of customers and revenue. It details the number of users of your product and how frequently they use it, how many of them are recommending your product to people in their network, how many of them are paying for it and how much they shell out.
Your customer-growth monitor is flashing a green light if more people are using your product frequently, if many of them are recommending it to their network and if an increasing proportion is paying a higher price for it. If customers are not recommending the product and very few are willing to pay for it, find out why and change your product. And if you’re not getting more customers or they’re not paying for your product, then you need to take more radical measures.
3. PRODUCT: It is the job of every business to create value and solve problems; that is how money is earned in return. The value being created can either be a product, a service, or both but whatever it is, it has to give people a compelling reason to give money in exchange, which is why every business needs a Product-development tracker. The product-development tracker lets you know whether you are on schedule for building the right products. It details the timeline for your products, whether your team is meeting its milestones and if not, what’s holding things up and the feedback you’re getting from
customers about the prototypes you're releasing to them.
Your product-development tracker will flash green if you are ahead of schedule and customers are giving useful feedback on the prototype. If you are falling behind on the
schedule and not getting customer feedback on the prototype, you're in trouble -- and should investigate why and make changes
Its vital for every businesses to pay close attention to these metrics. They should be monitored at all times, and not at the end of the year. Every other thing can wait till then but not these.
As Peter Cohan puts it, put them on your business dashboard. This will help you to spot danger signs and respond to them in timely fashion.
Cheers to your business' success
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